Loosing Trades...Get Used To It

Hey everyone thanks for stopping by, I hope your all having a great weekend. Its after weeks like these that I am sure, like me many of you are questioning your ideas on trading and if we are really any good at it. If you are thinking that way then all I can say is keep your chin up and have a positive attitude. Failure comes with trading and it happens a lot. All successful people fail at some point. Thomas Edison tried over 10,000 different experiments before finally inventing the light bulb. Bill Gates first company was a failure, and Michael Jordan was quoted as saying: "I've missed more than 9,000 shots in my career. I've lost almost 300 games. 26 times I've been trusted to take the game winning shot; And missed. I've failed over and over again in my life. And that is why I succeed."
The name of the game is not how many times you get it right, its how many types you pick yourself up try to learn from your mistake and trade on.

Have a good weekend!

Where Do I Place My Stop?

Hello everyone, thanks for stopping by. Today we are going to go over a few different techniques you can employ when trying to figure out were to place your stop orders.

First I always place a stop right after I place my opening order into a stock, this way I am setting my risk ratio at the very start and also take my emotions out of it from the get go. It can be pretty hard to take when it feels like you were the one idiot who bought the top, by setting a stop when we open our position we keep our ego out of the equation.
There are many different ways to determine were to set an initial stop, but I like to base it on the volatility of the stock. There are a few ways we can find this info but I like to look at a technical indicator called the Average True Range (ATR). Basically this indicator averages the daily price swings in a stock, it is usually an average of the last 14 days. If you would like to learn more about this indicator check Stockcharts.com.
Let me show you an example of how I would use this to place my stop.



Here is a stock that I have traded in the past that has been on a great uptrend over the last few weeks. As we can see around the first of July this stock started dropping and corresponding with that we see the ATR started rising and continued to a high of just under .60. Now if I was entering a position today there are two ways I could use this to set my stop, first I could set it at the high of .60, this way I assure myself that I wont get shaken out of this stock because of its normal volatility. Second I could set it at its current volatility of .50. This way I wont get shaken out due to its daily swings but if I do get stopped out I know that there is possibly something very wrong with this stock. Of course we should not just use this as or only reference. We should also look at support and resistance areas in the stock chart as well. For instance we can see that $7.25 is a strong support area and taking into account the current ATR of .50, we know that if it falls bellow $7.25 it has violated both major support and the daily range and we need to get out of this stock.

I hope this has given you all some new ideas and helps your trading in some ways. If you have any questions or comments please post or email me. Also for my most current stock picks check out my profile at SocialPicks.

Types of Stop Orders

Hello everyone, thanks for stopping by and reading my blog. Its been a rough day and I hope none of you lost too much money. If so keep your head up and remember it cant go up everyday.

Today I would like to continue my series on placing stops by going through the different types of stop orders that can be placed. This may seem very basic for some of you but its something I see lots of confusion on, even for experienced traders.

Stop Limit Order:

A stop-limit order is an order to buy or sell a stock that combines the features of a limit order and a stop order. Once the stop price is reached, the stop-limit order becomes a limit order to buy or to sell at a specified price.

Just about the only benefit to a stop-limit is an investor can control the price that the trade gets executed at. The major problem with this type of order is once the stop is hit it turns into a limit. If we do not place the order correctly we may never get executed. Lets use an example: I have 50 shares of Apple and put in a stop limit order. I place the stop at $127 and then I place the limit at $127 as well. When AAPL falls it hits my stop and my limit order is placed, but if it continues to fall we will never get an execution because this order now being a limit we needed to see the stock stay at $127 or better. This is a common occurrence and it shows many people don't truly understand this type of stop order. To be used properly we needed to put the limit price some were under $127, say $126 and we would have been fine. As we go through the different orders you will come to see that the stop-limit order should never be used.

Stop Orders:

This is your plain old stop order. A stop order is an order to buy or to sell once the stock reaches a certain price. When this price is reached the stop order becomes a market order.
This is very similar to a stop-limit order however instead of becoming a limit order when the stop price is reached it becomes a market order. At first thought this sounds like a disadvantage, however the whole point of placing a stop is so we can get out of a falling stock quickly. I would rather loose a few more cents than never get a fill and loose even more money.
For those of us who watch the stock market very closely this is the type of order most prefer. The reason being is that we can place this at a specific price depending on the situation and we our always in control of the risk we are taking.

Trailing Stops:

You can think of a trailing-stop as the fire and forget stop order for those who don't watch every tick. We can think of a trailing-stop as a Ratchet we can move it one way but if we try to go back it will stop and won't let us. So as you can see this type of order will follow a stock up but if it reverses the stop will stay in place. The stop can be set to trail the stock by a percentage or dollar amount.
This is by far the most popular stop and one I suggest that everyone uses. By using the trailing-stop properly we insure that we never go from a winning position to loosing money.

Personally I would never use a stop-limit order, there is no benefit to its use and only sets you up to never get your shares sold. The normal stop order is to me the best stop a person can place and is the one I always use when opening an initial position. For the trailing-stop I place this order once my stock has moved up from the purchase price and I am concerned with locking in my gains if the stock should reverse on me.

I hope this has helped some of you understand the different types of stop orders that are available. Tomorrow we will go over a few ways you can employ stops successfully. Happy trading tomorrow and lets hope the market does a little better.

Importance of Setting Stops

Hello everyone and thanks for taking the time to stop by my blog.
Considering how crazy the market has been lately, placing stops is the most important and at the same time the most frustrating thing you can do.
I can't count how many time I have seen people take big losses because they never placed a stop when they purchased stock. By far the reason always given to me is "I hate stops I always get taken out of a trade at the worse time". Indeed this can happen and can be very frustrating but if we stop to think about it for a minute we realize that is the whole point of a stop. Yes I know sometimes it can be very frustrating but it will save you from loosing a lot of money as well.

Now there are many ways and theories to placing stops. In the coming days I will go over a few of the most common strategies and the way I try to limit my looses.

Until then just remember PLACE YOUR STOPS!