The idea of this section is not to "pick stocks" but rather educate on how to pick Stocks with appropriate risk management, so that we can benefit from gains as well as cut short our losses.
We got stopped out of one position (1% loss) and hit a jackpot in another position (40% gain)...
- How did we manage our loss to minimum? - We always had a STOP limit and changed it every week based on underling stock action
- Why we entered this position? - Initially we got in this position as it was a good breakout pattern at the time
- Why we incurred a loss? - After weak earnings guidance, stock changed the direction and original breakout pattern was NO good anymore
- Why didn't we close this position right away? - Even though stock changed direction, it was above our original STOP limit. We waited for stock to bounce in order to minimize our losses and kept adjusting STOP limit accordingly
- Result is visible with a small loss
Our jackpot entry: TATA COFFEE (40% gain)
- Added to our watch list in late September 2012
- Entered the position based on breakout pattern in early October 2012
- Last week stock exploded and touched our target easily, this is called "jackpot"
- Now we lock in partial profits and let the remaining position ride with a trailing stop OR let the stock settle to establish our new STOP limit area
You can check out the entire watch list here.
Items you should focus on:
- Always check NOTES section for each stock along with STOP Limit - updated every week as per individual stock action
- Find out earnings date for stocks you have in your portfolio, so that you are aware of major events - this is not included in the watch list but links are provided for your own findings/research
- Understand current market direction and decide if you want to remain invested based on market scenario
Things to remember:
- No matter how great the company is and how stellar the earnings are, if market is in correction then the stock performance will be affected
- All boats rise in a rising tide, in short if market moves up then most stocks will also move up and vice-verse. If market is doing well then selectively chosen stocks has higher probability to provide good returns in short duration
- If a stock position does not work in your favor then get out, cutting losses is not easy but necessary, ONLY a disciplined investor/trader will be successful in long term
Be disciplined and manage risk appropriately...