December 20, 2007
Playing It Tight or Loose with Akamai?
Here’s an intraday chart of AKAM, which was the long tech stock idea for Wednesday. A lot of people are writing me to say that they’re using tighter stops than the one I suggest, kind of combining day trading techniques with the swing trading ideas.
I guess it’s OK as long as you understand that the tighter your stops — the less “breathing room” you give the trade — the more stop-outs you’ll suffer. If you’d like to share how you improve the execution and risk management of these trading ideas, please leave a comment. I’m all ears!
Cat: | Time: 11:51 am (utc+8)
December 20th, 2007 at 10:02 pm
Hi~
I really enjoy reading your site. And I particularly enjoy the old series Trading for Dummies (which I review frequently). I honestly thank you for doing that!!!
Regarding the trade ideas, I am not currently subscribed to them but if I were to trade them intraday, I would not trade them blindly. In other words, I would not pull the trigger as soon as the price hits the target; I would use the entry price as a target zone, and apply my entry criteria (whatever that might be for each of us) to play it.
tonto
December 20th, 2007 at 10:28 pm
tonto: Glad to hear you read and re-read the old Dummies lessons, and thanks for your comments on using the entry /exit prices as “zones” to consider.
December 21st, 2007 at 4:23 am
sell some when intitial risk roughly is captured. be on rest then trail.
December 21st, 2007 at 9:32 am
I kept the stop where you suggested since it was justifiable on the daily chart anyway. I just sized my position so that the stop was within my max loss. Easy as pie.
December 21st, 2007 at 10:30 am
@pete: How do you trail?
@steve: Yes, but if your stop were tighter initially you could take an even larger position.
December 21st, 2007 at 12:59 pm
Do you change your stop loss each day to that of the previous days low?
December 21st, 2007 at 4:05 pm
jacksoo: That’s what we’re trying to figure out… personally I give stop management some very hard thought when I’ve covered 1x my initial risk … whether I simply tighten it or move to breakeven is a matter of judgment.
December 22nd, 2007 at 9:50 am
trail- i like to break it into 1/3′ds
1/3 - out when risk obtained- fan of van tharp 1-3R for peeling this first fraction
1/3 - fast moving avg trail
1/3 - slow moving avg trail
December 22nd, 2007 at 10:59 am
peter: I’ve never read Van Tharp, maybe I should. What settings do you use for your fast/slow moving averages, if I may ask?
December 22nd, 2007 at 12:20 pm
I am reading two DeMark books right now but have Van Tharp teed up.
December 22nd, 2007 at 1:39 pm
Hi CM,
As someone else has pointed out, wouldn’t stop management depend on the positive expectancy of the system? Personally, to manage my own emotions, if the win rate was quite high (eg 75% winners) and the avg win was better than the avg loser, I’d have no problem keeping the stop where it is because of the win rate.
If the win rate was less than 50%, although you’d want to keep stops loose to let winners run and get your positive expectancy, it would be VERY hard emotionally for me not to tighten or trail stops and I would be moving to break even a lot more quickly.
Have you calculated a win rate on this?
December 22nd, 2007 at 3:33 pm
Eric: Yes, I agree entirely, but I’m waiting to get about 30 trades out of the box before I try to run any numbers on expectancy. There is no systematic stop management at the moment, but we’ll come up with one. I imagine the win rate is below 50%, but just don’t know yet. That’s why the picks are open and free in the meantime, until we figure everything out.
December 22nd, 2007 at 9:46 pm
Van Tharp is recommended reading, but I don’t think it was his idea to scale out by thirds.
I think that was Mark Douglas in “Trading in the Zone” who recommends the scaling out by thirds.
“Trade Your Way to Financial Freedom”, Van Tharp
“Trading in the Zone”, Mark Douglas
Both good stuff.
December 22nd, 2007 at 10:13 pm
Steve: Maybe Santa will be nice and send me a copy of each.
December 22nd, 2007 at 11:24 pm
btw, i found a copy of ryans book about MM
December 23rd, 2007 at 9:51 am
peter: The link doesn’t work for me?
December 23rd, 2007 at 10:14 pm
maybe try this route..its a 2MB PDF file
December 23rd, 2007 at 11:19 pm
peter: That didn’t work either. If you have the PDF file, just email it to me.