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The summer rally is now over, and while a few of my more profitable positions are still open, a lot of others have bit the dust. I made on average 5% over all my accounts, which was better than my expectation to lose money since this was the kick-off rally for my trading plan and therefore many mistakes were anticipated.
Since this is the first rally since the debut of my plan, here are some adjustments I think are needed:
Besides this I plotted the rise of distribution days in both indices superposed by the total average profit (open or closed) of total purchases made over the course of the trading days during the rally. You can clearly see that as the mountain rises, the quality of my gains deteriorate. Sticking to buying while d-days are low is probably key to not wasting money cutting losses on losers.
Have a great weekend!
RocketPower (Twitter, Stocktwits)
I agree with you, I have almost the same rules.
Nice post
great post - thx
I've had to continuously adjust my selling rules because I can't tell you the number of times I've been shaken out of a strong leader (one that rose >25% in under 3 weeks). Now, when I see signs of distribution, I'll sell my weakest stocks, but also trim stocks that have done very well, selling 25 to 35 % of the position. These are the stocks I want to only sell if they break below a prior base, or dive thru' the 10 week moving average on strong volume, or if I'm lucky, have a climax top. I owned QIHU, bought it around 36 and sold around 45 when the market got weak in June. If I could have just trimmed back a bit, and held it, I'd be sitting on a double!
I had that problem with TSLA, got scared out twice and was left with a third of my shares that are +50 % now. Just bot some more yesterday. Now I set my stops to the support level with the most conviction and size my position on that risk/sh, otherwise I set my stops too close and lose out.
This means I have stocks I'm willing to lose only 5% and others as much as 13%, however my portfolio risk between them is usually the same (1-2%)
After reading about trend following and some other OWL books, I'm also not sure about selling some at 20-25% profit anymore. I would rather raise the stop to the next support level instead, and virtually locking in that profit. It's more risky but the return is much better.
I was shaken out from QIHU as well when the market had a correction in J une and I did not buy it back from support on 50 day m/a, because I thought that during correction it is risky to buy a stock. The same with TSLA. I was shaken out during that bad dawn day and my mistake was not to buy it back when I saw so great support on 50 m/a. I was just scared by this wild movement. So we all have to learn all the time... I think it is never ending process...