[Date Prev][Date Next][Thread Prev][Thread Next][Date Index][Thread Index]

[Metastockusers] Tip



PureBytes Links

Trading Reference Links

SELL ORDERS

In the classic golf comedy "Caddyshack," the outrageously wealthy 
character played by Rodney Dangerfield gets a call from his 
stockbroker in 
the middle of the fairway. "I want you to SELL, SELL!" he yells into 
the 
phone, and then is stopped short. "They're selling? Then BUY, BUY!"

There's a nugget of market wisdom in that loopy dialogue: When 
everybody 
and his brother is selling, you can often grab a bargain by buying a 
stock 
as it bottoms out. Conversely, you can make some nifty profits by 
selling 
a stock when the fervor of buyers is at a peak.

Taking a couple of quick points off the board is a pretty good 
strategy, 
in our view, during this era in the market. Short-term investing is 
the 
name of the game. But if you're not a day trader and must have your 
nose 
to the grindstone at work, you can't closely monitor the action in 
your 
favorite stock to take advantage of a sudden price spike.

That's when a sell order comes in handy. In the same way that a stop 
loss 
order protects the investor from downside risk, the sell order gives 
the 
investor the chance to maximize rewards to the upside.

It's a simple procedure. If you purchase a stock at, say, 20 dollars, 
you can immediately attach an order to sell the stock at perhaps 22, 
two 
points higher. If/when the stock price touches 22, a market order is 
triggered, and you pocket two points for a 10% gain.

You can adjust the order, setting it higher or lower at any time via 
your 
broker or electronically. You can cancel it at any time. You can be 
at the 
beach or on the golf course when the price hits your target and you 
cash 
in.

Here's a situation where a sell order is particularly handy: Say your 
stock is poised to "gap up" at the open of the session and pop for 
several 
points because of good news (a new product, upgrade, merger, etc.). 
The 
problem is that the stock will often "fade" after the opening gap, 
reaching a peak in the first half hour of trading and then slowly 
sliding 
back. A four-point gain at 9:45 a.m. can dribble down to a one-point 
gain 
or nothing by 10:30.

If you recognize the good news before the open and realize that the 
stock 
is ready to gap, you can place a sell order a few points above the 
previous night's closing price. If the stock closed at 20, you can 
place 
an order at 22 or 23. At the open, there's a good chance that the 
price will hit-or exceed-your sell price, and you'll be safely out of 
the 
trade when shares begin to fade. If it fades back to an acceptable 
level, 
you can always reenter the trade.

The risk is that the stock will gap and NOT fade. The price could hit 
22, 
then 23 and continue through 24 and 25 before slowing down. You might 
leave some points on the table. But you've made a nice return on your 
investment, and you can still reenter the trade when you are again 
comfortable with the price.

Savvy traders try to grab every nickel of a gap open by shifting 
their 
sell order higher as the stock advances. If the stock gaps to, say, 
22 and 
continues to move, the trader might place a sell order at 23. As the 
price 
approaches 23, say 22.75, he might cancel the live order and place 
another 
at 23.50. If the price heads toward 23.50, he can adjust to 24. This 
can 
continue until the trader is convinced that he is selling at or near 
the 
short-term top. All it takes is a few mouse clocks.

Remember, if your sell order is triggered and the stock fades to 
below 
your sell price, you can reenter the trade at the lower price. 
Essentially, 
nothing has changed-except you've put some easy money into your 
account.

Plenty of traders use this technique while trading the Exchange 
Traded 
Funds (ETFs) that track the movement of the DOW--the "Diamonds"(DIA)-
and 
the NASDAQ-the "Qubes" (QQQ). When the pre-market action in futures 
indicates a strong open for either of these indices, a well-placed 
buy 
order for these ETFs attached to a timely sell order can produce 
double-
digit profits in a few minutes.

The technique also works in reverse for short sales in which the 
position 
gains in value when the underlying stock falls in price. If he senses 
a 
"gap down," the trader simply places a "buy to cover" order a few 
points 
BELOW the current price. If the stock drops to his price, a buy order 
is 
triggered to cover the short for a quick profit.

Sure, some of these tactics are beyond the skill level or interest of 
many 
investors. But every investor should at least consider using a sell 
order 
whenever he places a new block of shares into his account.

http://clix.to/wallmann



------------------------ Yahoo! Groups Sponsor --------------------~--> 
$9.95 domain names from Yahoo!. Register anything.
http://us.click.yahoo.com/J8kdrA/y20IAA/yQLSAA/zMEolB/TM
--------------------------------------------------------------------~-> 

 
Yahoo! Groups Links

<*> To visit your group on the web, go to:
    http://groups.yahoo.com/group/Metastockusers/

<*> To unsubscribe from this group, send an email to:
    Metastockusers-unsubscribe@xxxxxxxxxxxxxxx

<*> Your use of Yahoo! Groups is subject to:
    http://docs.yahoo.com/info/terms/