Re: [CANSLIM] Re: Stop Loss orders

From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Re: Stop Loss orders
Date: Sun, 8 Dec 2002 17:47:40 -0500

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Karen, average trading volume has little to do with it, more important is
the typical spread between bid and ask. In your example, volume is quite
sufficient to permit effective use of stop losses. As already pointed out,
Friday gapped down, so a lot of stocks started the day with the first trade
down. A tight stop loss would thereby be vulnerable.

I generally do not use hard stops, mostly because the stocks I typically buy
trade too thinly, and at too low of a price, to get Schwab to accept the
order. I have used them with some success in my margin acct where I am
buying higher priced and more liquid stocks, usually marginable and with
options possible. The key for me in using stop losses is studying the chart,
identifying the logical support area, and setting my stop loss right below
that. In other words, if it fails logical support, I want out. Period. No
further mental discussion.

While I use generalized percentage targets in picking a stop loss price (8%
from entry until I am up 15%, then the price of my entry, and continue to
trail 15% after that), the chart pattern is more important and I will adjust
these percentages to fit the chart and support level. I will also review,
and adjust up if necessary, my stop loss every day after the close or prior
to the next day's opening.

Stop loss should never be adjusted down.

- ----- Original Message -----
From: "Karen White" <karenwhite7@charter.net>
To: <canslim@lists.xmission.com>
Sent: Sunday, December 08, 2002 12:03 PM
Subject: [CANSLIM] Re: Stop Loss orders



Morning folks.... I may already know this answer but maybe I dont so want
to ask.  In an effort to tighten up and Not ride stocks down I have been
putting stop losses in place and "trailing" them up if the stock goes up
and leaving them in place if the stock goes down.  I have certainly been
stopped out a lot lately doing this.  But... the other morning I had a SL
on a stock 1.20 below the closing price.  First thing on the open this
stock was sold and the stock immediately jumped back up to the price it had
been at.  How does this happen?  Is the stop loss on someones radar and
they just go get it on the open someway?  But since it takes the stocks
trading at that price to make it an open order doesnt there have to be
another trade at that price?

Is the fix to never put stop losses on stocks that are more thinly
traded?  What would be a good number of shares traded to consider "mental
stop losses" rather than putting in the orders.?  This stocks (MVSN) has
average daily trading of 702 thousand shares.. That doesnt sound too light
to me but maybe it is... Is there another answer to do this?  Thanks for
all the help.  This market is truly frustrating!!! Karen


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