Page 317 - THE MARKET WHISPERER

THE MARKET WHISPERER 31 3

SMART Have you entered a stock that is not working in your favor?
MONEY Before fleeing at a loss, check the chart carefully and ask
yourselves honestly: “Has it really done anything wrong?”

When can we nonetheless start “getting angry” at a stock? When does

the concept of “it’s done nothing wrong” no longer apply? Look at the
chart and imagine a situation where you bought at [1], but the stock did
not return to its uptrend, and instead continued trending down. Where

is the point at which you’d start to get angry, or begin to doubt whether it
would reverse and trend up? My answer would be at around $87.25. At this
point, I would begin to realize that “something wrong” has taken the place

of the strong start, and I would exit. You can definitely be assisted by the
Fibonacci line of 61.8% to determine when the price pulls back a bit too
much. I would not exit precisely at the 61.8% level, but I definitely would
not stay with a stock that dropped much below that.

Why did I exit so quickly at [2]? In retrospect, it is clear that I should
have waited a little longer, but in real time I had no idea that the stock
would rise by almost $1.5 from its reversal point. Secondly, I needed to
put that trade behind me as quickly as possible. Remember, I want to see
profits. In this case I realized “half my size” in order to get to the point
where the other half was a “free trade.” In other words, following the

initial realization, I am at the point where I cannot lose on the trade even

if the price drops below the entry point. Selling half the quantity, even at a

smaller profit, helps me let the second half reach a peak that I am not sure

I would have psychologically been able to allow had I been holding the “full

size” and fearing I might lose out on the entire process. Realizing profit

does not have to be logical from a purely mathematical viewpoint. When it

is psychologically logical, it becomes mathematically logical, i.e. within the

range of profit.
Should we buy only after a clearly displayed reversal in five-minute

candles? The example above is clear and simple, but many other stocks

do not offer a chance to wait for a classical technical direction change

such as the lower doji. In such cases, you need to develop sensitivity and

buy the stock during its downtrend at the point where you estimate a
suitable change of direction. Clicking the buy button will occur before the
classical reversal shows on the chart in five-minute candles. To improve
your estimated entry points, carefully examine the quantity of buyers and
sellers noted in the BID and ASK areas of your trading platform. When it
seems to you that the stock is at its optimal point and the number of buyers