Stocks & Commodities V. 28:5 (31): Q&A by Don Bright
Product Description
Q&A by Don Bright
WHEN DO YOU ADD TO A POSITION?
I’m an intraday stock trader. I’ve never had a problem cutting my losses, but I could use a little guidance when it comes to taking more advantage from my winners. I know one option is to add on dips. Do you ever add to a position if it starts working right after you buy it? — JKlar
Trading decisions are based on all the variables involved, not just the stock’s price movement. One variable, of course, is the time frame the trader is accustomed to. If you are a short-term, high-frequency trader, then you may choose to take small profits, or losses, several times per day. If you look at multiday time frames, then you should set price targets, for profits and losses both.
In either case, you should look at overall market conditions. Assume you bought 500 shares of Xyz at 28.40 with the premium to the day’s fair value for futures is a plus $0.50, for example. Now the stock price is $28.60 and premium has turned to a discount of $0.50, you should consider selling the long position. We also look at ticks (the net of upticks vs. downticks, pivot points, peer pricing, and the value of the most correlated pair). All of these indicators should be right at hand to help you with your entries and exits.
WHEN DO YOU ADD TO A POSITION?
I’m an intraday stock trader. I’ve never had a problem cutting my losses, but I could use a little guidance when it comes to taking more advantage from my winners. I know one option is to add on dips. Do you ever add to a position if it starts working right after you buy it? — JKlar
Trading decisions are based on all the variables involved, not just the stock’s price movement. One variable, of course, is the time frame the trader is accustomed to. If you are a short-term, high-frequency trader, then you may choose to take small profits, or losses, several times per day. If you look at multiday time frames, then you should set price targets, for profits and losses both.
In either case, you should look at overall market conditions. Assume you bought 500 shares of Xyz at 28.40 with the premium to the day’s fair value for futures is a plus $0.50, for example. Now the stock price is $28.60 and premium has turned to a discount of $0.50, you should consider selling the long position. We also look at ticks (the net of upticks vs. downticks, pivot points, peer pricing, and the value of the most correlated pair). All of these indicators should be right at hand to help you with your entries and exits.
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