Trading for Dummies, Q&A #90

Protein Design Labs, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Monday, December 1?
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, December 1?
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 16.02 on a buy stop above the 10:30 inside bar.
4) Initial Protective Stop: 15.69. (max. 2.06%)
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.

..........

The sentiment was positive so I was looking for candidates on the long side once again.

PDLI gave a nice low-risk entry point with the 10:30 bar. Given my risk-tolerance, a 1500 share position was a good size. After the 11:30 up bar formed, I raised the initial stop to 16.27, which was more aggressive than usual.

When the stock dipped in the afternoon I came within a nickel of getting stopped out. In hindsight I should have raised the stop to .17 not .27 (I made a math error on the fly I think -- distracted by posting things to the website no doubt), but it didn't matter in the end fortunately.

The stock closed at $17.04 for a gain of 6.37% from entry giving a reward to risk ratio of better than 3 to 1.

Before you enter any position, you have to know where you're going to get out when you're wrong. Remember that if you set an initial protective stop, you're doing better than 95 out of 100 traders out there. And if you're risking 2% to make 2%, you're not going to make it far in the trading world.

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Screen capture of my intraday Watch List:

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