Anyone using Streetsmart Pro?

[Flyboy]

If so, I could use a little help on Bracketing and stop loss/profit exit.

Here's my question:

Say I place an order for xyz at $300. I want to protect the down side at $299, but I want the upside of say $305. What I do not understand is how to set the upside protection to move up as the price moves up...does this make sense? Let's say I placed an EXIT PROFIT of $305, but the stock is continuing the climb.///I'd like to take advantage of the movement up, but I do not want to lose the hit price of $305 should the stock begin a fall.

TIA, Paul

[netwrangler]

Originally Posted by Flyboy

If so, I could use a little help on Bracketing and stop loss/profit exit.

Here's my question:

Say I place an order for xyz at $300. I want to protect the down side at $299, but I want the upside of say $305. What I do not understand is how to set the upside protection to move up as the price moves up...does this make sense? Let's say I placed an EXIT PROFIT of $305, but the stock is continuing the climb.///I'd like to take advantage of the movement up, but I do not want to lose the hit price of $305 should the stock begin a fall.

TIA, Paul

Hi Paul,

Essentially, you want to set a trailing stop. This gives you a stop loss order that follows along with the price of the stock and will trigger when the stock declines by a set dollar amount or a set percentage from whatever 'high' the stock achieves.

Taking your example, you could buy at $300 and set a trailing stop for $1 decrease. This would give you your initial $299 stop loss. Also, if the stock increases to $305, the $1 trailing stop would move the 'trigger' to $304, preserving most of your profit to that point.

Sounds like a no-brainer, right?
The problem is that $1 is way too tight for a $300 stock. Normal 'noise' in the trading will trigger the trailing stop too soon, and you'll leave profits on the table while paying a lot in commissions and working the wrong side of the spread. [This last because the trailing stop issues a market order, which sells at the bid.]

I prefer to set both a stop loss — one that is, perhaps 5-6% below the purchase price — and an alert that is configured like a trailing stop. The alert would not trigger a market order, however, but will beep me and load the stock into the trading window.

So, to modify your example: You could buy at $300 and set a stop loss at $285 [5% below the purchase price]. If the market is kind, and the PPS goes up, you could then set a trailing stop for, perhaps 3%. Well, I'm suggesting doing that in an alert so you get a chance to review the market before you sell. You might set a limit order at that time. You might decide it's time to bail.

There is a discipline issue here. If you set a trailing stop as an alert, rather than as a bracket triggering a market order, there is a chance that you will decide NOT to sell, despite the alert. Moreover, there is a chance that decision will be emotional. Emotional decisions tend to be less profitable than others.

You have to know yourself. But, I would still keep a stop loss order intact. You might even move the stop loss level up over time as the stock price increases. In this way, the trailing stop alert becomes an early warning to you that something is going on with the stock, and you'd better take a look before the stop loss kicks in.

On the plus side for setting an alert, I have found that the best discipline for me is reviewing my alerts daily. This forces me to reevaluate my positions to determine if I still believe what I did when I set the alert.

Hope this helps.