Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Tuesday, July 27, 2010

It happens....

A quick note before I leave my office. I did not get a fill on any of the three new limit orders that went active at 7:00 a.m. This mornings pre-market trading was very thin and the price jumped right over my buy price and continued higher to a gap up open at 8:30 on all three.
I have a policy of never re-entering a new buy order higher up if a stock gapped open higher causing my order not to get filled. This typically kills it momentum and intraday shorters jump on it quickly. Granted, after drifting down from the gap up, it may turn back and go higher again. But 75% of the time the stock will not trade like it could have if they had not gapped it up, so my disclipine is to forget about it even if it takes off strong after the gap up has drifted back down. This is a game about knowing the percentages on every possible situation and having the disclipine to stick to those numbers. While you may miss out on a few good runs, sticking to your own percentage based trading rules will sooner or later keep you from getting hurt really bad in a trade.


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