Wednesday, November 12, 2008

Gauge Your Entries and Set Your Stops

When I am confronted with multiple picks and their price, I see two things.

1) I see stocks that are ready to run.
2) I see the closing price from the previous day.

Before the market opens I do several things. I go to Yahoo Finance and I look at the stock futures. This tells me if the market is tending to open higher or lower. I look at the news of my picks on their page. I open my streaming quotes and look at the pre-market action on my watch lists, which have my potential buys for that morning.

If Stock Assault gives me, let's say, stock ABC at a price of 18.99 , then I look at the bid / ask prices going on in pre-market action and how many shares, if any, have already been traded. If the futures are somewhat stable and stock ABC is at a pre-market ask price above the previous day and the bid is at or above the same, then I know I can place my order with confidence.

If I see futures really negative and stock ABC is showing pre-market ask and bid below the previous day close, then I will wait and let it run lower with the market before I get in. If I see thousands of shares traded pre-market at lower pricing than previous day close with highly negative futures, I won't even consider a position with ABC yet.

Gauge the market before hand and pick a good entry point. And, as always, place a stop-loss on all your buys reflective of your tolerance. Too tight of a stop will cause you to pre-maturely sell and too loose of a stop will cause you pain.

On most stocks I use a 10 percent stop and those that I see with a more steady nature on a good looking trading day, I may go 5%.

Have a good one,
Roger

2 comments:

  1. can I use calls instead of buying the stock with picks from stock assault?

    ReplyDelete
  2. I was recently asked about options, but the purpose of StockAssault is for swing traders, and options usually aren't in the time frame that make for a timely association. Picks are generally geared for 30 days or less and may not be reflective of future performance.

    ReplyDelete