(2013-09-19, 08:00 PM)gbarbs Wrote: I was thinking about posting a question to the group today so am glad this topic came up. Jere - get used to the quick advance. In only a few months I've had several advance pretty quickly on me. I am realizing that when it happens fast (or even slow) I find myself wanting to lock in gains - but you want to ride the winners as far as possible so at what point do you sell half??? I want to have a plan in place ahead of time so if a quick advance occurs, I have a rule to follow that can be followed with emotions set aside. Emotions get in the way when prices are moving significantly.
In the book he says you can sell half after a quick advance and then ride the other half using the stops he taught. I am trying to get a good idea on how to come up with a formula to identify a level where I'd sell half.
Don't have one yet. I think it should depend on how far and how fast, and maybe the price target if one is available? I really don't know. Looking forward to others thoughts....
There are a number of things that I look at personally for this, which is a combination of the Swing Target (if from a decent sized base), the Average True Range (ATR), point and figure price targets and any key resistance levels.
The ATR method is something I've developed over time, and I use it for both position sizing and to grade the quality of a trade, as each stock has it's own personality, and hence might move 4% a day if it's a small cap biotech, whereas a large cap utility stock might only move 0.5% a day on average. So a 5% move in a utility stock would be the equivalent to a 40% move in a small cap biotech. So I use the 200 day ATR to determine the volatility / average range of the stock initially and then look to achieve a good move based on the ATR sized targets. On a trader position this would be at least 4x the 200 day ATR figure, whereas on an investor position I'd be looking for more like 10 times the 200 day ATR figure.
The Swing target is explained in the book on page 246, and point and figure targets are projections based on the size of the initial breakout column on the P&F chart and so depend on the scaling method used. Hence it's useful to look at multiple scales to get an average figure.
These to me seem like sensible places to take profits, but there is no rules in the method on this area, just that he suggests taking profits when the stock has had a strong run and got extended, or when it breaks and closes below a key trendline etc.
