Clovis Oncology stock dropped -7% on Friday but I only took a very small loss in the trade, did you?
You need to understand the Internet and what goes on with stock trades to protect yourself. First, I’ll show you why I was protected from larger traders targeting my position.
Take a look at this chart. Where do you think I set a mental stop?
If you guessed here then you got it right:
You have to understand that large players as well as institutional traders monitor social network sites as well as non-protected and open free stock trading blogs like GuerillaStockTrading.com
There is a war going on beneath the surface that you may never see. I win that war more than I lose. What I’ll do is that I’ll often post stocks that have institutional trader accumulation and then I’ll watch larger players target a stock I blog about and then I joyfully watch them get crushed and stopped out for a loss. About 60% of the time that happens. Approximately 40% of the time that doesn’t happen. For the times that doesn’t happen, your stop loss will save you.
I’m under no illusion that all visitors on my website are here to go long my stock picks. I assume as much as 40% of my web visitors will attempt to short my picks. Many webmasters have put their stock picks behind a password protected site for just this reason. I don’t because I enjoy sticking it to short sellers most of the time.
My favorite tactic is to post about a stock I like but hold back a key chart or SEC filing that shows an institutional trader heavily accumulating the stock. I put forth a weaker case for why I think a stock is a good swing long entry. I watch the 1 minute chart for the usual short selling I see right after posting a stock pick. Then BAM! In comes a wave of buying and the short seller covers which pushes my stock up even higher, often on a gap up open and I sell and take the short sellers money.
There’s a constant battle going on of me beating short sellers and short sellers sometimes beating me. It goes on below the surface of every trade I post on GuerillaStockTrading.com It happens on every website that posts about stocks including mainstream financial media websites. You have to know and understand this and protect yourself with a clearly definable stop loss level. I did a lesson on setting a stop loss here. Try not to set a physical stop loss order on a trade (always set a mental stop loss order and then market order it when the level is hit) and never enter a long position the night before so that your order is filled automatically at market open the next day. Always move quickly with guaranteed time execution and a market order so that institutional traders and market makers with special access to unfilled orders can’t game your moves.
If a stock does a gap up open in your favor, sell immediately and book those profits.
These are a few trading pointers that you should already know and be doing. Remember, it’s dog eat dog. You are attempting to take money from someone who has no intention of giving you their money. They are attempting to reach into your trading account and take money from you. Hope for the best but always prepare for the worst.
Following these pointers will help you avoid big losses in trades like CLVS when they go against you.
Am I going to play the bounce in CLVS? No. There’s too many other juicy swing long trade setups elsewhere right now but that doesn’t mean you shouldn’t.