Page 410 - THE MARKET WHISPERER

406 PART 11 - Risk Management

made. Generally you need to take this decision during the final minutes of
the day’s trading, since that is when sought-after stocks tend to take off!

Sell all the quantity you are still holding towards the end of the day’s
trading or earlier, if the stock or the market has changed direction. By
contrast, if the particular stock ends the day with a clear uptrend and is

sufficiently far from your entry price, consider whether it is worth holding

the entire remaining quantity or perhaps reducing it further.

Why would you want to reduce that quantity a little more? To avoid
too great a risk. It is really dangerous to “go to sleep” with stock in hand,
since you can never know the reality you will wake up to in the morning.
I have already seen situations in which a stock shot up one morning and
plummeted the next. Leaving yourself a small quantity, based on the fact
that you have sufficiently profited from all the stock you have sold so far,
greatly reduces risks. I tend to decrease quantities as a matter of course. If
you have chosen to “sleep on” the stock, known in trader jargon as Swing
Trading, you will need to continue managing it correctly in the coming
days. More on that later.

SMART When you are in a multi-day swing trade, you need to
MONEY disconnect from intraday trading rules. Your decisions must
be based on the daily charts alone, and not on intraday
volatility. This is a worthwhile guideline that pays off!

• Rule 6: Raise Your Stop

Are you staying for a swing? Excellent. The profit potential in a swing
is higher, and you need to aim for a swing with a strong stock. Often, you
will rake in more on the balance of your remaining stock than you did on
the intraday trades. Now you need to understand that you are in multi-day
territory, which is completely different from intraday conduct. You need to

relate to the stock’s volatility from now on only in terms of its daily chart.
Has the price changed direction? Within the trading day, that is no

longer interesting information. But at the daily level, yes, it is interesting.
Do not get angry over the price movement even if its trend changed at the

intraday level, or the next day, or even if it opens on the next day with a
gap down which wipes out half the profits you made the previous day. On
the contrary: if it drops below your entry point, or below yesterday’s low,

that’s another story.