Reply to JFB on the Trading System you mentioned...... this version is by John E. Zidar
"When buying stock (that you have researched), it is good to make multiple purchases at different prices...(as it falls);
For example lets say I buy the stock KRPF (imaginary ticker) 4 times:
2000 shares at .69
2000 shares at .38
1000 shares at .24
2000 shares at .19
Those are 4 separate purchases that can each be sold at their own EXIT points for profit at different times and different days. Why commingle all your purchases of KRPF together in one lump, averaging them all together (as if they are one purchase) and consequently only providing yourself with one Exit point for the whole batch. Why limit your options?
See, if I averaged all 7000 shares together I would be at break-even point of 39 cents; anything above that would be profit....for that type of strategy!
|But I don't do this for short trades(...only long holds).
However, if I treat each stack/purchase SEPARATE and on it's own merit (as if it was a completely different company), THEN I can sell and cash in for my profits BEFORE my average price is hit and the stock is in the RED for me
Lets say for conversation sake I am looking for 40%% profit on my investment. I would sell each as follows:
2000 shares at $.99
2000 shares at .53
1000 shares at .33
2000 shares at .26
So then, if the price hits a resistance and won't go above .37; by averaging my shares together as one purchase, I would be stuck IN THE RED waiting, hoping for it to keep rising.
However, by treating each purchase separately, I can clearly see that I have two stacks that can make me money right now (WHILE THE STOCK IS IN THE RED!)
One at 2000 shares for .19
and one at 1000 shares for .24...."
