will today be the day?, page-56

re: jocam9...thanks for the reality check... Trade, just be careful what impact others opinions might have on the subconsious and you act according to sound trading rules that suit you. Posts like this from jocam9 concern me a little. First of all let me say that he knows a lot about the oil market and obviously works hard at it and I have looked at the sample newsletters and they look worth the price for those playing in the oil sector. I know three fifths of you know what about spec resource stocks. In fact Nido is the only spec stock that I own.

Why does it concern me? Well, everyone who is in the market should have a trading plan that suits them and the discipline to stick to it 100%.

A trading plan isn't something like buying a stock and selling it when it goes up 50% - how do you know it will ever get there - what happens if it doesn't - what next? What happens if stock A goes up 50% and it is sold to buy stock B and then stock A continues to go up far more while stock B falls? Was that the correct thing to do - just because it hit a 50% increase that was never guaranteed anyway?

In my opinion a trading plan that offers any chance of sucess must surely must consist of locking into long term trends to make large gains with rules in place to exit withou questions asked when the trend changes? In time these long term trend wins far exceed the small stop losses taken by applying discipline. If there are no long term trend wins then I doubt very much that money can be made by most people and they will wash out with brokerage, slippage and other overhead costs.

In my experience I have made my biggest gains from staying with a trend and not getting shaken out by what 'I think' the stock should do - what does what I think it will do have to do with it - I can't predict the future, but I can apply some trend trading rules and more importantly money management rules - that is what I can control.

How many times have people been shaken out of a good trend because they have no plan for managing the trade once in - ie buy at $2.00 and a month later it goes to $3.00 so sell because it has gone up so much - pay half the profit in tax and then 12 months later the stock is $5.00 (and the capital gains tax would now only be half as held greater than 12 months!).

If the money wasn't needed at $3.00 to feed the family then why exit just because it hit that level.
Rather than this, why not lock in until the stock violates a trading rule that indicates in 'probability' the trend may be over - ie 13 week ema has broken down through a 26 week ema or 26 week ema down through a 50 week ema etc... doesn't matter what as long as it works to keep us in trends and not try to predict tops. Also even more importantly when we are close to our exit signal and then the trend continues we add to our position - that is good trading!!

A rule I often use (not always - depends on the stock) is that I stay with the trend until the 13 week ema crosses down through a 26 week ema (sometimes I will allow 26 week ema through 50 week ema depending on the stock). There are a number of rules that can be used - doesn't matter as long as it is sound and applied with discipline.

As an example pull up a weekly chart of PSA and plot the 13 week ema and a 26 week ema.
Lets say an entry rule is that you buy breakouts on new 52 week high where volume up at least 50% on weekly average, 13 week ema slope is up (maybe also use Darvis boxes -whatever).

In May 2002 PSA met this entry criteria at 20 cents - applying the rule of staying with the trend until the 13 week ema crossed down through the 26 week ema then a trader would have been in th stock until an exit signal about 16 August 2004 at say $1.05 - more than a 5 bagger for just over 2 years work - ie $20,000 becomes $105,000 in 27 months - and the capital gains tax is half the marginal rate as held for more than 12 months.

ok - missed the top and there were drawdowns at times and had the sharp retracement in August 2003 become a downtrend then the exit may have been only 50 cents by the time the ema's had reacted as per the rule - but this is what keeps us in the trend. Also on other stocks it would not have worked - that's life - no guarantees in the market!

This is an example - at times good gains are sacrificed, if a trailing stop is preferred x% behind the current close then fine - there are various rules based on the traders style - my point is rules must be present for entry, adding to positions and exit.

What does this have to do with Nido - maybe nothing!!
For a stock like this then the 13 week ema to 26 week ema crossover obviously isn't appropriate at this point in time as the trend is steep (but might be in the future) and an exit rule on the daily chart is more appropriate - ie when 13 and 26 day ema both slope down - whatever.
The point I make is that if no rule is in place for riding a trend then the best gains can be left on the table - and yes you can go broke taking a profit - as the profit may not cover other losses!

This is not to suggest to anyone NDO is a buy or a sell just a general discussion on the fact that we can't predict the future and in my opinion the best wins are made when we lock into a long term trend and are not shaken out by our attempts to predict the future.

All the best.

p.s. I understand the concept of sell before a drill and accumulate on bad news as a technique that some use - if thats their plan then fine but in my opinion this will never keep people in a trend long enough for the big wins.