How To Play the Quick Moving Trades

Some people have commented about how to enter into the fast moving, intra-day plays after having not gotten their orders filled at the alert price.

Here's a simple solution, and really a rule that I nearly always obey when entering and exiting a trade:  Use a limit order to enter the trade.  Set the limit order a little above the ask.  You do this for two reasons, one: so that your order will get picked up as the stock moves up and you won't get left behind without a fill, and two: so that you will get the best possible price on your order between your order limit and the current ask price, sometimes equal to the current ask price, depending on how fast the stock is moving.

A side benefit of this kind of entry is this:  if for some reason the stock drops while you are entering your limit order, as I have seen them do on occasion, then you may actually get in the trade at a price cheaper than you originally intended, because the limit order simply means that you want the best possible price, up to and including the price of your limit.

This is a very effective way to enter these fast moving alerts.

Now, when it comes to exiting...

Again, I can never stress this enough, it's far better to exit a trade with a meager 20-30%  profit than to get caught in a dump and lose money, exiting at a loss, or to get stuck in a trade by holding it too long where you now can't exit because all of the action is gone (buyers have left the trade).

With that in mind, I'd much rather kick myself for getting out with a profit and watching the stock continue to run 200-300% more without me in it, than to find myself in the aforementioned situation, holding the bag, so to speak.  So, how do you do it.

Well, I don't know anyone who is 100% accurate at this, but the best way that I know of is to set a standard, maximum profit, sell limit order as soon as your buy order gets filled.  That way your profit order, if all goes well, will get filled on the ask and you will be out with profit (I recommend 20-25% for beginners or those trading with limited capital) and your sell order won't stall the momentum for other traders as the stock is allowed to continue its run.

This one thing means the difference between many a successful trader and those who end up quitting because this just didn't work for them.

"OK, what if the stock doesn't reach my max profit limit order before it starts to go back down?"  Good question.  It's one that we all hope we never have to deal with, but in all likelihood will have to deal with from time to time.  Your options are really few at this point.  You can either leave your sell limit order, or lower it and hope for a bounce, you can decide to hold the stock indefinitely until your order is filled (and this can take days to months to years, depending on the situation), or you can "whack the bid", which is to place a sell order on the bid price, or set a limit order below the bid price.

Bid whacking is not recommended, ever, when a stock is still on an uptick.  To sell on the bid in a case like that is sheer stupidity.  It stalls the upward momentum of a stock and ruins the trade for other people trading the stock.  But, if you must, when a stock is tumbling down and you need to preserve capital, then feel free to sell on the bid.  That may be the only way to get out of the trade without waiting it out, just don't tell anyone I told you that...lol.  And I understand, when you're beginning, that you might feel like every trade could be your last, but in the event that a stock has been shorted by the market makers, it may be in your best interest to wait it out for three days rather than selling at the bid price and taking a loss.

See you at the market!  Pursue your Passion!