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Smoke 'em (or Trail 'em) If You Got 'em
As I've mentioned in the past: Money management--the use of protective stops, trailing stops, and profit taking--is crucial to your long-term success as a trader. A simple money management system is to take at least half of your profits when they are equal to or exceed your initial risk. You then move
(i.e. trail) you protective stop on your remaining shares to breakeven. This way, barring overnight gaps, you have a "free" position that has the potential to turn into a homerun (through the use of trailing stops).
Let's follow up on Gollinhas Aereas Inteligentes (GOL | Quote | Chart | News | PowerRating), mentioned recently in my trading service and in interactive presentation (email me if you need copies of either). We we last left off, the stock had rallied to hit the profit target of 2 points--(based on the rules of the primer---as usual, email me if you need a copy of anything mentioned), the protective stop was then trailed to breakeven. This sets us up for a potential homerun on the remaining shares.
Now, let's fast forward to today (Friday, 12/23/05). Notice that the stock rallied nicely to new highs. The stop is trailed on the remaining shares on a 2 point basis. This way, you have a chance to continue to participate in a longer-term move.
I'll continue to follow up on this one--good, bad, indifferent--in future columns and presentations.
On Friday, the Nasdaq chopped around in pre-holiday trading. It's important for it to rally back above resistance soon.
The S&P put in a similar performance.
So what do we do? As the big blue arrows illustrate above, the indices remain in a sideways trading range. Therefore, as momentum players, there's not a whole lot for us to do--except to wait for the situation to resolve itself. Also, the week between Christmas and New Years is notorious for being thin and choppy. Said alternatively, it's usually not a good week to be trading. So tread lightly.
No setups tonight.
Happy Holidays/Happy New Year
This will likely be my last column for the year. I'd like to take a second and thank you for helping to make it a great one! Your kind words motivate me to be a better trader and in turn, share that knowledge. For those that have sent me hate mail, thanks for the fodder!
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.
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The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.
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