Sold ST Engg at 3.47.
Profit of 2R.
ST Engg surged to a 3-year high of 3.58 last week. I did a mental trailing stop of 3.47, one point of perceived support of 3.48.
I once talked about buying stocks that seem to be at a relatively high price. But then when the price is high, it reflects the value of the stock. Conversely a when a stock is cheap, the fundamentals underlying it is also of equivalent value.
You may argue that you cannot make much by buying at high prices. But then let's not talk about making profits first. Talk about preserving your capital. Statistically only a small minority make meaningful profits on a consistent basis. I venture to say it is less than 5% (and I am one of them!).
Let us look at professional hedge funds. There are 3000 over of them in the US. Again, only a minority is making money consistently year after year. Most just come and fade away. Some have stellar growth and even larger implosions (collapse). Turns out they indeed have risk management in place but their traders manage to sidestep that! That is NO risk management.
Reading from: http://online.barrons.com/article/SB50001424053111904571704577404264215025458.html#articleTabs_article%3D2
"In the last three years, the Top 100's average annualized hedge fund returns were an impressive 25.55%".
Keep that in perspective, and you will probably think more about what it means to invest in the markets.
Some school of thoughts is that market are efficient at any price, that is the forces of buying and selling make the price.. In some sense it's not wrong to go in for a trade at higher price. But if you go in at very high price I think if the stock turn different direction either you have to cut lost or wait it out for the next run..
ReplyDeleteExactly, and that is how I make money consistently for the past 2 years. I determine my risk for the trade, good reward/risk ratio. Higher prices tend to go higher. Trends tend to persist. That is my edge.
DeleteI lose half of the time and those times I win, my profit is usually 3 times more than what I lose.
Cutting losses is part of the cost of my trading business. Lose well and small. You have to know that losing well is key to capital preservation. And in this business, if you take care to preserve your capital, the rewards will come.