Stops should be set to accept a maximum of 7-8% loss when trading any of IBD's top rated stocks. Rationale: IBD is tracking "big-dog" investors. When heavy-hitter investors start trading a stock, it can follow profitable channels. But, when they move on to something else, these IBD stocks often fall fast and hard without recovery. So, if the decline goes beyond 7-8%, it is likely to just keep going. GHM may be an example of this, as well as MOS, RRC, or KWK. Not sure if this is completely accurate, but it seems plausible.
We allowed a greater loss margin for GHM and ended up losing 11.5% on the trade.
We allowed a greater loss margin for GHM and ended up losing 11.5% on the trade.
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