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Tuesday, January 10, 2012

LIZ

It took all of a week, but I made the first bonehead move in the Market Watch game. I bought LIZ on the breakout and yesterday had a pretty nice profit, but did not check to see when the earnings date was. it was last night, and you can see the results. I haven't made that mistake in my real account in several years, but got careless here. I took a small position and set a wide stop, so despite a 14% drop it hasn't hit the stop yet, but I expect it within the next couple of days.

Posted by David at 8:29 AM

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2 comments:

Michael said...

Hi David,

It would have been a nice trade on the "W" formation. Good thing you went in small.

How wide is your stop? Also do you have opinion on entering stops on a stock? I don't have very good knowledge on how big of a stop one should put in.

Thanks,
Michael

January 10, 2012 1:34 PM
David said...

Hi Micheal,

I put a stop at 8, which is just under the 50dma, and about 10% or so under the buy point. I wanted it wide because I expected this to dip right after the breakout (which it did not do) then move higher, and I didn't want a tight stop taking me out. I usually try to figure stop levels based on the volatility of the stock, the present state of the market, and the whereabouts of important technical levels. I don't have a lot of faith in this rally, and a lot of stocks have been pulling back right after breakouts, so I left this one a little wider than I normally would, and took a smaller position than normal (smaller compared to the size of my account. Since this account is $100,000, 200 shares is a small position. It would be a large position in my real account). That way if I do take a bigger than normal loss on this stock, I am not risking a large part of my overall account. I don't have a formula to work with, it is usually a spur of the moment judgement. The important thing to remember is never lose more than 8% of your total account one one trade. Hope this helps.

January 10, 2012 3:11 PM

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