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Hi All:
This is a very interesting topic.
I'm talking in theory only, because I lack the trading discipline to carry
through.
Lichello in his book "How to Make a Million Dollars in the Stock Market
Automatically" has mathematical formulae whereby he would liquidate a
specific number of shares at a specific price as the stock moves higher,
and more when the stock moves higher still.
For example, if you've bought 50 shares of QCOM at 100, and you're lucky to
hit the bottom price.
As QCOM moves up in price, you'll be gradually unloading your shares.
There's a "buffer" factor below which there will be no trade at all, even
if initially you're told to sell. His default value is $100 (i.e., if the
dollar value is less than 100, you might as well forget about doing a
trade). I'm arbitrarily changing it to $500.
Assume a straight line rise in price value, with $5 as increment. The
following trades will be triggered (through his formulae):
shares selling
sold price
-------- ---------
5 125
5 140
4 155
3 170
3 190
3 205
3 230
2 255
2 280
2 310
1 340
1 360
1 385
1 410
etc etc
So your profit targets are variable. Everything is pre-determined (except
if you want to play around with the parameters of the variables), and you
don't have to worry too much about what happens next.... (In fact, after
you've sold some, and if the stock goes down to a certain level, you'll buy
again....)
NOTE: In his book, he advocates checking prices on a montly basis, and
leaves room for others to do what they want to do - weekly or even daily.
On page 58, he said: <because we've been taking partial profits> "... if
we are near the peak of the market <or stock - my words> , AIM will
probably have the bulk of its assets in cash, rather than stocks..."
Because of the unusual nature of the stock market (bullish for many years),
the buy-and-hold results are performing better for a lot of the stocks that
just go up and don't go down much. But then that's hindsight.
>From my personal observation (though I lack the discipline to follow
through), it works beautifully for a lot of my leaps.
I can't say the same thing for futures, however. That's an area I dare not
touch.
Anyways, his is only one of the infinite number of exit methods....
Regards,
Wong
========================================
At 09:00 AM 01/26/2000 +0100, Gwenael Gautier wrote:
>That is one of my weak points. I am not good at picking a good exit for
winning
>stocks. So far the best I know is hang on until initial story is no longer
valid,
>which I determine through a bad (disappointing) chart pattern or some news
that
>goes against my story. Otherwise I may just stay in until I need cash for a
>better idea still. In both cases I usually get a flash I need to get out
now and
>do this and that, like a picture in my head of what the future is going to
be. I
>know it is intuition when it is a fully unsollicited picture, usually
completely
>unrelated to what i was just doing. I then act immediately, at the market.
>Experience has shown I am much better of following my flashes than not.
>Scaletrade@xxxxxxx wrote:
>
>> In a message dated 01/25/2000 2:31:57 AM Pacific Standard Time,
>> ggautier@xxxxxxxxxxx writes:
>>
>> > Re stops, I almost never change my stops, but indeed came to this rule
>> > because of
>> > the same feelings...
>> >
>> Gwenn,
>>
>> If you don't use trailing stops, then how do you exit? Is it gestalt,
gained
>> through many years of trading, or do you have profit targets, or get out
on a
>> sharp move in your direction, or...?
>>
>> Curiously,
>>
>> Larry
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