Madeline says: I’m up $1300 on THI. Should I sell?
David says: Let me take a look.
Madeline says: I sold. Too late. haha. Got all scared.
David says: It is not a bad thing to have a little fear. It is good to take profit (one of my trading adages). It was good to take the profit but you should consider buying back in on a dip from its high of $31.50.
[At 10:15am, THI on the TSX hit a $31.60 high. At 10:36am, THI pulled back to $30.32. At 11:00am, THI reached back up to $31.00.]
David says: The StockTradersPlace chart shows THI on an up trend. Today will be a StockTradersPlace buy action if THI holds up (closes above $28.66 with an up candle).
[In fact, THI had a gap-up open at $29.00.]
Madeline says: yeah. I don’t understand. Why would I buy back in?
David says: If it is on an up trend as StockTradersPlace shows, then THI will be climbing higher (StockTradersPlace will buy if THI closes above $28.66 with an up candle; so far, that looks like it will happen). Therefore, you buy back in to make more profit for a day-trade, or hold and ride the up trend beyond today.
Madeline says: Why the hell would I buy so high though? It doesn’t make sense.
David says: It is not about how high it is; it's about how high it will get. The only thing that matters in trading is to be on the correct side of the trend.
Madeline says: yeah
David says: If you want to avoid the risk, then it is perfectly fine to wait for the stock to dip back down. But when will you buy back in?
Madeline says: No. I need to take risk. That is what the course is asking for. I don’t know when to buy back in. haha
David says: How low does it need to go before you consider it "buy low"? That is why I keep saying, you need a trend following system that indicates to you what the technical signals are. That way, you have guidance (something to go on) for your "buy low", "sell high" cycles.
Madeline says: yeah
[Then she had to go off to an online test. She is logging all the chat sessions. I hope the lessons sink in. The lessons will be revealed in her report of her trading experiences from the trading simulation exercise.]
Main Take-Aways:
- A trader really does need guidance on when to enter and exit positions. Guidance may come from fundamental analysis, technical analysis, listening to your broker, going on analyst recommendations, … throwing darts.
- Trend following through technical analysis is a key component in the equation. Getting in sync with the rise and drop cycles is very important. Once on track, a trader will become more confident, execute winning trades more frequently, and will be in a position to repeat the process (ride the cycles) for successful trading.
StockTradersPlace (http://stocktradersplace.com) provides a trend following system that is conducive to trading the trend cycles.
Use the StockTradersPlace system to make paper trades on the demo stocks available to guest users. Sign up for the StockTradersPlace free trial to gain access to all supported stocks.
Show yourself that you can repeatedly execute winning trades using StockTradersPlace as an element of your trading tool box.
