Why Not To Use Stop Loss Order
I'm busy investrader trader. I work full time so it is not easy for me to trade throughout the day. Thus, from time to time (read: sporadically), when I'm going to the meeting with an open order, I need to minimize damage to my portfolio in case something was happening to the stock while I was not looking at its chart. During those times I use stop-loss orders. Stop-loss orders are dangerous and I want to share with you something about them.
A stop order (also stop loss order) is an order to buy (or sell) a security once the price of the security has climbed above (or dropped below) a specified stop price. (Note that both bid and ask prices can trigger a stop order.) When the specified stop price is reached, the stop order is entered as a market order (no limit). This means the trade will definitely be executed, but not necessarily at or near the stop price, particularly when the order is placed into a fast-moving market, or if there is insufficient liquidity available relative to the size of the order.
I filled an order for 400 PFE at $17.90 (its support). I set a stop-loss at $17.78-- I like to take tiny losses. While away, look what happened:
For a fraction of a second, the price fell to $17.75! Coincidence? This is what happens when others set stop losses and the movement is bearish-- they are being taken out within fraction of a second. More importantly however, stop losses can be seen by market makers and they sure know how to make your life miserable.
Regardless, my stop loss order was not taken out and I'm still in this trade.
Best of all, just see what happened right after:
A few words on the Economy from Christopher Probyn of SSGA
I was fortunate to attend a presentation by Christopher Probyn of SSGA
"The Financial Crisis: Causes, Consequences and the Prospects for Recovery."
I spent more time listening than writing things down so pardon me for just providing an outline of what he mentioned that interested me.
- Headwinds to the economy: Weakness Abroad, Deteriorating Commercial Real Estate Markets.
- V Shaped recoveries usually follow deep recessions, Mr. Probyn is looking for a U shaped recovery to play out.
- Unemployment will reach at least 10% (It's close enough now and we shall see Friday if it happens already)
- Inflation will come way down from the current 1.5% due to the higher unemployment rate.
- There is a good chance CPI will break below 0% (It already has in Japan and Europe) Deflation Alert!
- Do need to worry about inflation until capacity utilization rate goes to at least 80% (Currently in the 60's)
That's all Folks. I hope you found it interesting to say the least.
-K
Downhill from here Or more upside?
The SPY made a hanging man candle today and so did a few other stocks like C (reporting tomorrow before open)
It happened on a bullish trend so it is defenetly a bad sign.
It is late but I will update tomorrow with more writing and of course my favorite thing; charts!
-K
Current Picks Page Updated
As you might or might not have been aware. I have a tab on my page with a select group of symbols that I throw up on my strategy and post signals every weekend.
I have been away for the past 3 weeks so I haven't been able to update it.
Click the link below to go to the page
http://investingfreak.com/current-picks/
Have a good weekend.
-K
Investing Freak is on Twitter
I do realize that I don't post at regular intervals but now I have set up a twitter account for the site where i can write down quick thoughts that aren't worth making a blog post about.
I hope those of you that have twitter can follow.
http://twitter.com/investingfreak
Other than that I will be taking a break until end of July by which time I hope to have some new posts to put up.
Take care.
-K
Summary of picks from yesterday
Yesterday’s picks turned out to be right on. Although with pathetic moves, AMD gained its way up. It has been trying to break its new resistance at $4.50 majority of the day. Unfortunately, I followed my plan and sold it in the morning to break even (including commission) because I did not have any more patience from watching it a day before. If I would have kept it for the day and trust my own gut, I could have made easy $0.2501 per share (or 6%). I hope some of you had more patience and easily profited on AMD. The lesson to be learned from this is that I’m very impatient trader.
AIB is hanging strong. Even though I intended to keep it for a longer period of time, I sold it with $0.26 per share profit (or 9%) because I needed net liquidity for other trades I did today. With that said, AIB is still a keeper and I will very likely get back into this stock some time this or next week.
| Company | Buy Date | Sell Date | Buy Price | Sell Price | Gain/Loss |
|---|---|---|---|---|---|
| AMD | 5/18/09 | 5/19/09 | $4.1399 | $4.15 | - |
| AIB | 5/18/09 | 5/19/09 | $2.89 | $3.15 | 9% |
Although single digit, 9% profit overnight is always nice.
Let me know what you think about those two picks in the comment box.
Stock tips from the Freak strategy
After SKF's latest blunder in which I called the sell-off then couldn't resist the LOW LOW price of $155, I set off to design a strategy that overtime would bring consistent growth. I am using a 4hour interval for the strategy so it really isn't day-trading but also it's not long term investment (like those exist much anymore).
The idea is to give stock tips when the strategy throws me a Buy signal then to call the selling point when the strategy yells SELL.
Now If i use the S&P 500 or the Russel or any other index (all the stocks within it), I will get a lot of buy and sell signals that will drive me crazy.
I'm wondering if any of you have ideas on which stocks to put on watch list. I will also need to create a section on this page to show the buy and sell signals with their dates as well as how much gain/loss occurred.
I think i might be going a bit over my head as many people do this for a fee (Timothy Sykes anyone?) but I will think this through for the next week or two and then decide what to do. Your comments are really needed this time especially for ideas on which stocks to put on the alert list.
Till next Time,
-K (The busy man)
10% Gain in a day when people panicked
This is feeling like a monthly posting but I assure you I'm getting back into it as I have finally started making trades again.
I just made 10% of $1000 in 1 day. (small position)
Bought GE yesterday morning at $20 sold at open today for $22.25.
After I bought it yesterday I went to class and never followed it. Today I just sold it. So in 5 min. work $100. The market is still not stable and won't be for a while so I will make plays like this often.
Earnings for Q3 have started and Bank of America blew it. If more blow it then the market will be very volatile for a while. I love it. How have you done recently?
Below is the Profit triangle I drew around my GE purchase.
Good Luck and I hope to resume regular weekly (at least) postings.
Welcome New Readers
I would like to thank you all the readers of my blog and to the recent google reader subscribers.
It seems like I don't post regularly in this blog, I understand that being a new blog in town means I will need to write more and more to get my ranking up but that is not why I created this blog. It is merely a place where i vent off or share my thoughts on the current market or economics situations.
I hope you can live with one or 2 quality postings a week instead of 12 crappy postings a day (like i see on some blogs) because i am not a full time blogger.
Hope you enjoy reading my thoughts and I encourage you to take a little time out of your busy schedules and write a comment or 2 in the stories so I know if i am attracting the right crowd.
Thanks
-The Investing Freak (You can view my latest trades by following me on covestor )
