Replies to post #11738 on General Stock Ideas

[gfp927z]

Bigworld, >> If I wait until a reversal is confirmed the trade become less profitable <<


Yes, but at least the trade will be profitable. If you just guess that this is the top and are wrong, the trade puts you in the hole. And if you don't have a stop loss in place and let the loss run, you're in deep trouble.

One analogy would be if you were at the beach, the tide was coming in, and you were trying to bet on when the tide would reverse and start going out. You knew it was going to happen eventually, but not when. If the tide was actually still coming in but a weak wave or two came along, you could be fooled into thinking the tide had turned and thus mistime your bet. So you wait for clear confirmation.