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When to sell question?

  • 28-12-2020 8:35pm
    #1
    Registered Users Posts: 208 ✭✭ Poloman


    I am new enough to trading. It is going well this last 6 months which is nothing to write home about as most things have gone up.

    Today I thought I had my research done on OSTK. Everything from Analysts to target point of 100 (I would use 98 to sell). I spent 2.5k today ot 58.13. This would be a medium term investment if not long term. I got some shock when I see it has dipped to 51.88 (so far) today. I cant find any reason for this and not sure why it is so bearish. I didn't set a stop loss as I wasn't sure it was the bottom before a trend change so I was willing to come down but the amount it came down today is a big surprise.

    Can anyone offer any insight to this? I had 5 stocks to choose from and I pick this beauty.

    PS This is Nasdaq.


Comments

  • Registered Users Posts: 7,399 ✭✭✭ Nonoperational


    When you say trading, do you mean you want to trade short term positions or do you want to invest long term with a view to growing your portfolio?

    Lots of tech growth stocks fell today. In the scheme of things a day is completely inconsequential and if you like the fundamentals should make no difference to you.

    Be careful, trying to outsmart the market and you’ll lose. Be sure of your fundamentals before you invest too much.


  • Registered Users Posts: 208 ✭✭ Poloman


    Thanks Nono. I am fully aware it has been a very easy 6 months to make money I am under no illusion this is easy. I am into swing trading..1-6 weeks. Day trading is not viable as I don't have that cash. I am starting with around 10k to begin with. I am reading at the moment. I work full time

    The money seems to be moving into tech today. FUBO, MMED, RKT on watch for me today. looking at trend changes either 4 hour or daily.

    Anyway my question is can OSTK bounce back or should I just cut my losses at 12%... thanks and happy to be here btw


  • Registered Users Posts: 807 ✭✭✭ Jimbobjoeyman


    couple of things you need to ask yourself when looking to get out of a position.

    1) how big is one standard deviation.
    If you've a volatile growth stock 12% might be only one or two standard deviations and it could swing the same way or back again tomorrow.
    But as said above you shouldn't be worried about a one or two day move if your sure of your research.

    2) If your buying this stock and looking to hold it for 1-6 weeks, why are you holding it ? do you have a reason for such a short hold ? if you don't have a reason you'll get murdered in the market with such a short term view. drawing a few lines on a chart and hoping it moves up isn't good enough. Fundamental analysis only really works over the long term. A holding of 1-6 weeks would be looking to exploit a market inefficiency which are generally rare enough or your taking a punt on news going one way or the other.

    3) If your talking about chasing money thats gone into tech on a day to day basis your already too late.
    Once you see the money move you've already missed the boat on that.
    Many algo traders have programs that look for volume in the market and attempt to get orders in ahead of it. As a single person on their computer your not going to be able to constantly scan activity of mutiple markets around the clock.

    I'd recommend you increase your holding period to a few months at least and look at why your taking positions from a fundemental view knowing your companies and the business model.
    If you think its a solid stock and you've done your research and your happy knowing its a volatile growth stock that can have wild swings hold your ground on it. If not; then get out of the position.

    Edit - After having a quick look at this stock and its got an average daily standard deviation of about 7-8% over the last three years with a 30 day look back period. So a 12% move in one day while high isn't outragous for this stock.

    At the end of the day they cant all be winners which is why you should build a portfolio and diversify. that way some of your winners will offset your losers.
    If youd invested in all five of those stocks you were looking at equally and the other four went up you would have only taken 20% of the loss on this one.
    Read into modern portfolio theory.


  • Registered Users Posts: 208 ✭✭ Poloman


    Wow. Superb reply thank you so much!!! Great advice. I currently have 13 different stocks and one crypto (XRP of course I would pick that). I agree with everything you said above. Ill save that post its very good.


  • Registered Users Posts: 807 ✭✭✭ Jimbobjoeyman


    Poloman wrote: »
    Wow. Superb reply thank you so much!!! Great advice. I currently have 13 different stocks and one crypto (XRP of course I would pick that). I agree with everything you said above. Ill save that post its very good.

    If your genuinely looking to learn and build out a portfolio as described you should read about modern portfolio thoery and the efficient frontier in an attempt to gain a view of your risks and how you manage them and make sure your taking on risks at efficent weights.

    But its math heavy and probobly goes past the methods that would be used in an average retail account. But good reading all the same to gain a top level view of market risk and managing it.

    Value at risk is also another good topic to read about.
    Definately has it's flaws but it'll give you a view of what your expected losses are in a given day to a certain confidence level.


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  • Registered Users Posts: 208 ✭✭ Poloman


    I'm currently on my third book and have 3 more to read. The Intelligent Investor is always a good place to start. Looking at chart patterns now, few books on that. Then a big book on options with exercise books to complete. I agree with read and learn.

    I'm also in a discord group (that doesn't charge anything, although they are creating some alerts for some prices which I don't need). I wont be paying a cent for any of that.


  • Registered Users Posts: 807 ✭✭✭ Jimbobjoeyman


    Poloman wrote: »
    I'm currently on my third book and have 3 more to read. The Intelligent Investor is always a good place to start. Looking at chart patterns now, few books on that. Then a big book on options with exercise books to complete. I agree with read and learn.

    I'm also in a discord group (that doesn't charge anything, although they are creating some alerts for some prices which I don't need). I wont be paying a cent for any of that.

    Technical analysis is rubbish in my opinion.

    Just because the five minute chart makes a head and shoulders or smiles at you doesn't mean anything.
    Take foreign exchange pairs for example as its the mostly widely used in patterns and chart analysis there is zero mathematical explanation of the current price in any of the past price data; All of the explanatory power of the model goes into the error term.

    I work in an institutional setting and other than maybe some very basic volume analysis technical analysis and chart patterns are not taken very seriously at all.


  • Registered Users Posts: 208 ✭✭ Poloman


    Ok so maybe I have been approaching this all wrong. You reckon do the homework on the company itself and look for long term growth? I was looking at swing trades say a few days to a few weeks and trying to turn over more profit. When I get to around 10 percent profit I set my stop loss there and move it up when the price gets higher. When it sells itself I am happy.


    Just seems long to put a large portion of my cash in say Tesla now at price eg 700. When I next get to invest the price (hopefully) would be 750 so I buy again thus increasing my average share price and so forth and so forth.

    I am investing a set amount every month.


  • Registered Users Posts: 807 ✭✭✭ Jimbobjoeyman


    Poloman wrote: »
    Ok so maybe I have been approaching this all wrong. You reckon do the homework on the company itself and look for long term growth? I was looking at swing trades say a few days to a few weeks and trying to turn over more profit. When I get to around 10 percent profit I set my stop loss there and move it up when the price gets higher. When it sells itself I am happy.


    Just seems long to put a large portion of my cash in say Tesla now at price eg 700. When I next get to invest the price (hopefully) would be 750 so I buy again thus increasing my average share price and so forth and so forth.

    I am investing a set amount every month.

    Theres no get rich quick scheme in financial markets unfortunately.
    Your strategy seems to be completely focused on a stock increasing in value quickly over a short time frame. Effectively betting on which way its going to swing over a short time frame.
    I'd argue thats no different to day trading which is gambling.

    When your holding a stock long term you would generally have a sale price in mind and and an in depth well thought out reasonong for getting there.
    Markets short term are chaotic and even the best fundemental analysis normally takes a long term view.

    Take Donald trumps twitter account for example for the last four years markets would swing up or down based on these tweets and this could be completely removed from your holdings fundamentals as so much of a stocks day to day movement is made up of Beta or better known as market sensitivity. There are countless factors like this.
    This is why short term investing is seen as gambling. Over the long term if you have your research done, your assumptions hold and if you are correct the holding should overcome this and converge to something close to your exit price. Well thats the hope anyway; everyone has stinkers also.


  • Registered Users Posts: 7,399 ✭✭✭ Nonoperational


    Its a totally different philosophy Polo. If you are increasing your investment fund regularly in my opinion the best way to go is to create a nice balanced portfolio based on your risk tolerance and look for good opportunities. If you wish you can add some ETFs to reduce risk and add diversity.

    You wont make the massive gains that are possible in short term trading but the vast vast majority of retail customers who try to trade end up losing it all. At least start with a small percentage for trading and do something more solid with the rest.


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