Monday, November 9, 2015

Manage Your Profits - $FB $ORLY $LNKD $LUV $AMZN $ULTA $SBUX $STZ $PSX

Manage Your Profits

The reason every trader gets involved in the market is to make profits!  As traders, we identify the right stocks and the right entry points for trades but many retail traders skip the critical step of creating a trade plan that includes a profit target before pulling the trigger.  The consequence of that oversight is that those traders will sit around watching their screen or smartphone trying to determine their exit point in real time.  Not only is that incredibly risky, it's a massive waste of time and energy!

I always encourage my students, followers, and colleagues to create a trade plan with all 3 possible exits:

  1. Profit - If you commit to a profit exit, you're free to use those profits to place more trades and increase the size of your portfolio
  2. Loss - Conserve capital when a trade goes against you
  3. Timing- When a growth stock moves sideways and misses its breakout, your money is tied up and doing nothing for you

Quick example, I recently placed an option trade on $PAYX on Oct 26th. The trade plan included a profit target of 100% and my window of opportunity was 2 weeks in order to avoid the option expiration on November 20th.  Everything went according to plan and I hit my profit target of 100%!

So now that I've accrued those profits, it's time to harvest and re-invest them into the next trade.  My trading style, is to keep things moving along - almost in an "assembly line" fashion.  

My Capital Is My Inventory

I like to treat my capital the same way a retail business would treat their inventory.  I want that inventory to move, and if it doesn't - I replace it with fresh new inventory.  On Thursday November 5th, while I was out running errands, the trade met my profit target and the sell order was executed automatically.  Thanks to the style of trading I use, I wasn't eating up time in front of my computer or iPhone to monitor and micromanage that position. 

It is always best to automate a trade with contingency orders to close out the trade for profit.  This is a really critical step if you're going to save time and boost the efficiency of your trading routine.  When I talk to other retail trades, they often tell me that they just don't have time to sit down and create a trade plan.  However, they'll go on and on about how they've spend countless hours watching the daily for their position tick by tick.  My question to them is, are you tracking that time spent?  Wouldn't that time be better spent creating a trade plan?  I certainly think so!

Stocks on My Watch List

Currently the best performing sectors since the follow through day on October 2nd are $XLK, $XLY and $XLF.  Stocks in these sectors account for most of the gains in the market over the last 5 weeks.  Low risk stocks that offer us an opportunity this week are:

  • $FB
  • $ORLY
  • $LNKD
  • $LUV
  • $AMZN
  • $ULTA
  • $SBUX
  • $STZ
  • $PSX

The bulls are still in charge.  The market has made a +10% move over the last 5 weeks. For the past 4 sessions, the market has moved sideways. This is to be expected, institutions need to digest their profits and re-orient for their next positions. You should expect the market to consolidate some this week and watch for stocks to retrace to their buy point. 

Happy Trading!



















DISCLAIMER



Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


The Information I provide is for education and informational purposes only. The Information provided is not intended to be and does not constitute financial advice, investment advice, trading advice or any other advice. The Information provided is general in nature and is not specific to you or anyone else.


YOU SHOULD NOT MAKE ANY DECISION, FINANCIAL, INVESTMENTS, TRADING OR OTHERWISE, BASED ON ANY OF THE INFORMATION PRESENTED WITHOUT UNDERTAKING INDEPENDENT DUE DILIGENCE AND CONSULTATION WITH A LICENSED PROFESSIONAL. You understand that you are using this Information AT YOUR OWN RISK.