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John,
A technique I quite like for exiting trades (ie taking profits and as a
stop loss) was first introduced to me in a book by Daryl Guppy - "Share
Trading -An Approach To Buying And Selling" (1997).
The COUNTBACK LINE was adapted by Daryl from Stowell's 3-Bar Nett Line,
which is a moving support or resistance line recalculated daily.
Apparently, Stowell found temporary support or resistance three bars
back from todays price.
For example, in an uptrend the CBL trails below todays price - 3 bars
back. If the price closes below the CBL it signals a possible sell and
should be monitored the next morning for the opening price. To keep you
out of whipsaws, if the price opens above the CBL hold on but if it
opens below the CBL, close out. It is recommended to be used in tandem
with P&F charts and trendlines.
It' easy to monitor each day...if the price has moved up you simply move
the CBL up to the next bar accordingly so you are close to the action.
The CBL can also be used as an entry technique.
If you want the rules and an example let me know.
Ian Burgoyne, Melbourne
John Manasco wrote:
>
> After reading several posts recently by some new and old participants in
> the list I would like to start a discussion of my favorite subject,
> namely loosing money. It seems there is a lot of confusion about when to
> get out of a stock or commodity. Most of that confusion is between my
> ears.
>
> First when you purchase a stock or commodity when do you pull out if the
> position moves against you? Second, how much do you let your position
> fall thinking that it's just a retracement a will continue the move?
> Could someone explain how to use stops properly? Especially trailing
> stops. Do I need em? I am getting mad watching my profits evaporate and
> go into losses.
>
> Last week I went flat in my portfolio. I sold all my stocks and kept all
> my option straddles. Then I fretted all week that I had missed the
> bottom and would miss the next up move. That's when I realized I have
> too much emotion involved in my decisions. I have always said I don't
> have a good exit strategy but I didn't realize just how much my emotions
> were playing into it. Now I question my entry strategy too, and that's
> pretty much mechanical. The subjective part is whether or not to
> actually put the trade on.
>
> Everyone tells me about fear and greed dominating trading decisions. I
> also think I have listened too long about my time frame and goals. I
> have been investing for ten years and trading for maybe five. Over that
> time people have told me to invest for the long run, let my profits
> ride, don't be swayed by short term blips, decide what time frame I want
> to trade and all the other admonitions about trading. This has served to
> confuse me more than help me as I made the transition from investor to
> trader.
>
> So I admit it, I sometimes lose money because of my exit strategies. A
> lot more than I would like to admit. So what are some of your thoughts
> on exiting a position. I really hope I get a lot of feedback on this
> because this is really important to me, and it seems to a lot of other
> people too.
>
> John Manasco
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