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Portfolio123 » List all forums » Forum: General Comments » Thread: actual buying and selling |
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Total posts in this thread: 16
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LawrenceKohl
Advanced Member
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I'm rather new at this - and I'd like some advice on when to actually buy and sell a port recommendation. My port is rebalanced over the weekend. I'm nervous about placing a Sunday market order for Monday and see the stock jump in the opposite direction then where I want (buying highest/ selling lowest). Am I overly concerned? Or, do I do a limit order and if the stock doesn’t get to the limit let the buy/sell go? Or, do I watch the makret to make a trade during the day? That also seems perilous (especially on the sell side) as well as I simply cannot watch the market all day long. I also am wondering about the practical application of stop loss orders. If my port has a stop loss rule of x% do you wait for the weekly rebalancing period to make the change? Do a rebalance each day? Put in an actual stop loss order with my broker each day? I’ve gotten whacked with sudden massive drops in Smp, Intt, Zons, Dtlk, Syx. So I am looking to see how I can better cope with future situations. |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Offline |
LawrenceKohl, I have tried a number of approaches to placing orders, and this is what works best for me. 1) NEVER place a Market Order on Sunday when the market is not open unless you can verify that there is an after hours market with reasonable prices. Otherwise you will get burned frequently, especially if you trade Small and Micro Cap stocks. On those stocks where there is no real after hours market there are too many jerks out there who will place a limit sell order 20% or more above the market (or below the market for a buy) in the hopes that some one will place a Market Order. If you place a Market order, the jerk's Limit Order IS the market and you just gave him a 20% (or more) profit. 2) I set up my trades over the weekend and then execute them shortly after the market opens Monday morning. I have given up trying to improve my strike price by chasing the price during the day. 3) I place a % trialing stop loss on my holdings shortly after my buys. Using a % trailing stop loss enables me to only enter the loss % once as it will follow the price up a fixed % behind. I normally use a % that is a little larger than the stop loss in the Port. This stop loss is for preservation of capital and not for best performance like the one in the Port was set up for. If the stock is sold on Monday > Wednesday I will do a manual rebalance and buy a new stock. If it is sold later in the week I’ll wait until the weekend's newer data is available and rebalance. Denny  ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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LawrenceKohl
Advanced Member
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Denny: Thank you for your cogent response. If I may ask about the % trailing stop loss. How do you determine what % to use? You said a little more than the port.......is the % based upon the market cap that the port trades in? Is it based upon a general volatility that you are comfortable with? Is it tailored to the individual stock? Can you give me an idea of the range of stop loss % that you have found workable, not too close to get taken out and not too far to lose too much capital? Lawrence |
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gfagerlin
Advanced Member
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Lawrence: I agree with all of Denny's points. I do the same and paid the price for market orders. I buy or sell Monday AM generaly to avoid the swings in the market open prices. I learned the hard way and paid my tuition to those guys Denny mentioned. I use a % stop loss that is higer than the model to avoid being stopped out in my brokerage account. Generally if my model has a 20% stop I will set the brokerage stop at about 25%. This seems to limit me from being closed out of a stock. Check out some of the posts on this topic in the past if you want a more detailed discussion. I remember an active discussion on trading. If you do a search of the forum using "trading" you will see other comments. Glenn Fagerlin |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Offline |
Lawrence, I base my % trailing stop loss as the higher of the Port’s stop loss + 3% to 5%, or 5% above the stocks normal trading range. A few of the Micro Caps will have a normal trading range greater than the Port’s % stop loss. I review the last few years of the stock's price and pick a value that is about 5% above its monthly swings, but below any large correction. However, I don't use a value > 30%. If a stock exceeds that value I declare it a loser, sell it, and try a different stock. It may come back later, but I don't care, I have already picked a different stock that, by my results, has a > 70% chance over the next month to out performing the stock I sold. Denny ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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jerrodmason
Advanced Member UNITED STATES Joined: Jan 14, 2005 Posts: 599 Status: Offline |
I agree on the danger of market orders, but wouldn't a trailing stop suffer from the same problem? Some years ago I was stopped out of a NASDAQ stock even though my stop was below the low for the day. It was explained to me that (except for NYSE) the highest unfilled Bid will trigger a sell, whether or not a trade took place at that level. It's all too much for my Pooh-brain to handle. J ---------------------------------------- The smart money was on Goliath. "He's not the Messiah. He's a very naughty boy." |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Offline |
Jerry, My broker, Fidelity, holds the stop orders internally, and does not execute them (send them to the market) until the stop is hit by the stock's price. This is handled automatically by the computer and does not rely on a broker to monitor the price. Also, they will only execute the trade during normal market hours. Maybe some of the other members can tell us what their brokers will do. Denny ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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bdbrown
Member
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How does one determine the stop loss for a portfolio? |
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DennyHalwes
Advanced Member UNITED STATES Joined: Apr 28, 2004 Posts: 1532 Status: Offline |
bdbrown , The stop loss for a portfolio will be in one of the Sell Rules. Some examples are: PctFromHi <= -20 This rule is a trailing 20% stop loss. PctFromHi <= -10 & Rank < 99.5 This rule is a 10% trailing stop loss, but only if the stock's Rank value is less than 99.5. GainPct < -20 This is a fixed % stop loss that only sells the stock if it falls 20% below the purchase price. There are many more examples that can be found in members public Sims and Ports. The way to determine what rule or value to use is to run Sims trying values that you are comfortable with, and see what is the effect on the Sim's performance. When you find one you are happy with be sure to test the Sim for robustness. Denny ---------------------------------------- "The significant problems we face cannot be solved at the same level of thinking that we were at when we created them". Albert Einstein |
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bdbrown
Member
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For the Value & Mom $100K port the following are sell rules: Rank Rank < 94 SellRule2 MktCap>2000 For the older Value w/Momentum port the sell rules are: Rank Rank < 99 Laggard NoDays > 28 and GainPct < BenchPct What would the stop loss be for these ports? Brian |
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Re: actual buying and selling
