Thursday, January 10, 2013

A sharp riser - now a sharp faller

My last post here was concerned related to dealing with stocks that move extremely fast, thereby significantly increasing the open risk on the position. I also mentioned that these stocks can also suffer major pullbacks, without necessarily violating the developing trend.

One of the stocks I referred to has shown what can happen in these cases (chart below). While you would still be sitting on a multiple R profit, I think this shows the value in using the uniform risk exit approach in dealing with movements like that shown here, not only from the point of banking some quick profit, but perhaps more importantly from the emotional aspect, as this rise and subsequent fall could have been stomach churning.

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