Thursday, 11 October 2007

What to do when in Limbo...

There we are, like a sprinter readying themselves up for a big race. Get set, ready, GO!

And we're off buying a new stock on breakout! Then what? That's the big question now. Patience happens to be a virtue every trader must have when entering any position.

Everyone wants to make money immediately. Who doesn't? However, the true test of character of a trader is not when they make or lose money but when they're in a position which has neither reached target nor met the stop. In short, you're in trading limbo.

There are a number of options that present itself to the trader: look for a faster moving stock and dump the current one, hold it until thy kingdom come (or it reaches target, whichever comes first), sell the sucker and never come back.

Let's talk about the last two first as these are easier to tackle. Hold it until thy kingdom come means you bought, you're waiting, yet the stock doesn't go up and it doesn't go down. Patience and character are being tested here. Are you disciplined enough to wait for your target to get hit and get out at that price? Are you disciplined enough to sell when it hits your stop? If yes to both questions, you may have to be a poor clone of a random walker who has bought and is now holding.

Sell the sucker and never come back. You either can't wait or you just don't want to wait. Therefore, selling a snail of a stock seems to be a logical reason. This way, you already eliminate the process of waiting. Time is gold, man!

Now the last: look for a faster moving stock and dump the current one. First of all, searching for that faster moving stock is like playing roulette. With so many options, which one will it be? Dumping the current stock may seem like a good idea in order to make your fund more active. Then again, I've already had the experience that the stock moves AFTER you just sold. You then become an indicator for other people. This one will give you anguish and it might haunt you for a while.

So what do you do when in limbo? Do what the others do. They wait...and wait...and wait... until you get sick and tired of waiting.

Personally, I would go for waiting for my target. Unless a faster moving stock suddenly presents itself.

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