Wednesday, October 27, 2010

10-Minute Rule for Intraday Stop-loss (GMCR short update)

Twitter entries are 140 characters only and instead of an 8-part explanation there of my stop-loss benchmark now for GMCR, I'm going to lay it out here instead.

Readers at home can see how I suffer a position going against me. Oh my God, I'm meltinnnnnnggg!! ...tune in to GMCR today and watch me burn.

Follow Centrifugal to fade trades in real time

Would-be Tweet in 8 parts:

>11AM [EST] now, so I'll explain my 10-min rule 4-intraday stop-loss bnch. It's based on NH or NL (intraday, depending if you are long or short)..

...I will often take punishment early, whereas tighten-up a benchmark later-session. Beg. 11AM I consider the early mkt as ended...

...$GMCR early high 2day = 33.33 and %-gain + vol-pace not forcing me out (5%+ on 2x's+ vol-pace would-have forced me 2cover short)...

...No such vol or %-gain on $GMCR & rise is on take-over chatter, so I held; but 10-min rule now in effect (given >11AM now)...

...10-min Rule for short = cover-short post-11AM if name makes new intraday high & remains > previous high 10min later...

...For $GMCR now, that means if it trades 33.34 or higher, then I am stopped-out if pr is 33.34 or > 10 min later. Stop then placed 33.34

...the reason this works is that a brief spike to nh's will not shake you out, but if it sustains at new intraday high, you must exit

...33.34 stop-price would then be in place for remainder of session. The more liquid a name, the better this works; $GMCR liq-enough.

That's all for this one. This rule has saved me many times (from getting taken out too early, but still taking me out if ultimately necessary) and was designed after numerous times of being stopped-out because something made a new high intraday (or new-low for a long), stopping me out, but only to mark the high (or low) on that very spike (you'd be surprised how often this occurs at mid-day). Waiting 10-min at that time gives it the further necessary proof/confirmation that you are only screwed (whereas when they jack to new intraday high and then re-trace, you survived). Again, this is if you decided not to blow out a loser sooner (and for me, higher volume and %-gain forces me out no matter what I might think). This rule works for when you are not perfectly sure and the name might re-trace later in the session. In this case, if GMCR re-traces in the last 90-minutes - I'm less of a chump and the rule gives me a better chance to still be involved. Finally, if a stock takes out a high in the final hour (or new-low if this is a long), then the 10-min rule is not important - the stock is taking you out at a time of day you can better trust.

Who is going to buy/takeover GMCR, by the way? That's a funny one :^)

right-lick and expand to view chart

No comments: