Keep it Rolling
It’s no secret that the fastest way to compound your money is to keep it working for you. For that reason, when I’m in the market, I do my best to keep my trading capital at work in stocks that are on the move. I lose patience quickly in trades that stall out, because I know there’s opportunity elsewhere I ought to be capturing. So when a stock begins to lose steam, I raise my stops aggressively so that if the trade begins to flutter, I am checked out of the stock and am free to put my money to work elsewhere.
KEA worked for a little while, but once it slowed down I raised stops aggressively. When stocks slow down, there is opportunity elsewhere to capture.Today I was stopped out of KEA (Keane Inc.), but with a gain. I highlighted this stock as a swing trading candidate in my stock newsletter 2 weeks ago with a buy point of $14.50. KEA quickly began to work, showing me a gain of 9.5% in just 8 days. I raised my stop on Sunday night, and on Monday this stock began to fizzle out. With the market on the verge of a breakout, I was in no mood to stick with this trade, knowing that there would be a number of other opportunities I could catch if KEA was going to stall out. Today, I was stopped out at the close.
Getting stopped out doesn’t bother me, for a few reasons:
1) I booked a winning trade of 4.5% in 2 weeks. Not stellar, but not bad either.
2) I like to keep my money rotating into new stocks with potential, rather than sticking with a stock that is no longer on the move in my direction.
3) I now have more cash on hand to put into new setups which I highlighted tonight in the Member Area.
Force your trades to continue showing you why you should keep them on your screen. When your trading capital is at work, expect a lot from it. Whenever your positions stop producing profits for you, it’s time to move on to something else that will.
By keeping your money rolling from one good trade to the next, you’ll be able to rack up returns that would make the buy-and-hold crowd blush.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Related Articles:
Scott | Apr 6, 2006 | Reply
This cuts both ways. I go back and forth on this one.
Take a look at EQIX. It showed up in my scans around Jan. 23. It triggered at around 46 and then went no where for about 2 weeks. It tried to shake everyone out the second week of Feb. Those who were bored by then no doubt were clad to get stopped out around 44 — or, if they tightened their stops, maybe with a small gain at 47 or 48. By the time this was all done, nearly 4 weeks had passed.
Of course, we know how this story ends. From there, it marched upwards over the remainder of Feb. and March, to top out at around 64.
I realize you can’t let your money sit for months going no where, but even 2 or 3 weeks is too long for many folks. In swing trading, these are the moves we love to catch. These are the moves we need to catch to make up for all the other little ones that go against us.
What do you use to decide it’s time to punch out, or tighten the stops?
Administrator | Apr 6, 2006 | Reply
Hello Scott,
Thank you for your comments. Interesting that you mention EQIX, we caught the last move in it which was nice http://www.thestockbandit.com/RecentPicks.htm. But I certainly agree, any trader cannot leave money in one place for very long and let it stagnate. I actually use my Swing Trading Strategy as a guideline for when to raise stops, you can find it at http://www.thestockbandit.com/Swing-Trading-Strategy.htm.
As far as a time stop, I don’t have a rule of thumb other than if a stock isn’t moving higher after breakout out of a base with the market posting gains, I lose interest in the trade quickly and ready to shift into something that CAN move for me. Probably 90% of my trades last under 2 weeks, so if I’m still in a position by then, if it isn’t really showing me something, then I’m happy to book whatever gains I have and move on to something else.
Hope this helps, thanks for your comments.
Jeff