Trading for Dummies, Q&A #59 & #60

CheckFree, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Monday, October 27?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Monday, October 27?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Up. You'd be looking long.
3) Long at 28.98 on a buy stop above the 12:00 inside bar.
4) Initial Protective Stop: 28.79. (max. 0.60%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) Stopped out on the 2:30 bar.

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CKFR has had a huge run, up about 40% in the last month, so it's pretty stretched. Nevertheless I thought it might get a little boost in the afternoon, and the noon bar provided such a low risk entry point that I decided to go for it. Instead of getting a little bump up in the afternoon, CKFR broke down and stopped me out for a loss.

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Pumatech, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Monday, October 27?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Monday, October 27?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Up. You'd be looking long.
3) Long at 6.39 on a buy stop above the 11:30 down bar.
4) Initial Protective Stop: 6.23. (max. 2.5%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could sell half, carry half, or just close it all at once.

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PUMA closed the day at $6.65, giving a 4% gain from entry which was OK, not great, considering the initial risk was 2.5% (reward to risk ratio of 1.6 : 1). My trading buddy Steve always moves his stop to breakeven once his initial risk is covered, which is great money management, but I like to let things have a bit more space usually. It's all a matter of knowing your comfort zone.

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Screen capture of my intraday Watch List:

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