Avoid Profit Target Thinking

Feedback in:

Hi Michael, I would probably say my biggest challenge is knowing exactly when to get out of a trade. I have lost a lot by not setting a stop loss on certain trades for fear of whipsaws and exogenous events. Seems like as soon as I sell the darn thing turns around and heads back up.

Probably also need to understand better which stocks to trade and which ones to leave alone so I know when to trade big and when not to. I am about down to trading MSFT and indexes for now.

Thanks so much,
Michael D.

That’s a description nothing like trend following. Why the monthly target?

My overall strategy is to swing trade pullbacks (especially from new highs) on uptrending etfs and stocks (see TROW). I have an Ameritrade account of 100K on which I target 3 to 5 percent a month and use Think or Swim to look at candlestick charts and determine support and resistance.

• I always chart a 20 SMA and a 50 SMA and only take trades above the 50.
• I look for the 20, 50 and 200 SMA to all be stacked positive
• Typical hold times are 3-4 days to 3-4 weeks
• Most trades are short puts 1 to 3 strikes OTM depending on my conviction
• Will buy put call options 1 strike in the money if overall market, sector and stock is bouncing up.
• I am willing to exit most or all of the position after a 10 to 25 percent move up.
• I check IBD and Vectorvest for stocks with good fundamentals.
• I also will also trade breakouts on good volume (see RNG)

I do have another account in which I try to find etfs and boring stocks that I can hold for longer periods with a trailing stop. Hope this was not too much information but I was not sure if you wanted specifics of my trading plan. Some of my favorite tickers right now are: MSFT, AAPL, CRM, AMD, LULU, PCTY, GPN, TDOC, SPY, XLK, TQQQ.

Many Thanks,
Michael

I would stop that. A different point of view is here.

The Author