FAQs Frequently Asked Questions
Q: Let us say that you have said that a stock is buyable based on a pocket pivot and the information is sent out after the close or I do not read the email until then. I then decide it makes sense to buy it or to add to my position based on my objectives and risk tolerance. You have previously stated that it is okay to purchase the stock next day. My question is when? How do you approach it? Do you ever trade in after hours or pre-market? Should a person wait for the market to settle and find its range before buying on the following day or should you just hit it on the open with a limit order to protect against the stock being too far above the entry – say 3% - 5%?
A: You should buy the stock as close to the pocket pivot buy point as possible. If you buy x% late, then this adds x% additional risk to the trade. If this x% exceeds your risk tolerance levels, you should wait until either the stock gets into buying range, provided it still is acting right, or ignore the trade altogether. Another trade will come soon enough.
You could trade after hours or premarket to get as close to the pocket pivot price so you're not paying up beyond your risk tolerance levels.
Limit orders to protect against the stock being too far above the entry is fine, though dont get too obsessed with saving a percent here or there. Your primary focus should be to own the stock within your risk tolerance levels.
|First published:||21 Oct 2010|
|Last updated:||12 Apr 2012|