It’s simple. Before you ever buy a stock, you decide on a profit percentage you want and you be prepared to lock in the price as a good til canceled sell order until it does, in fact, hit that price. Here it is in a step-by-step process:
- 1. Decide on a stock that fits some basic criteria. I thing a stock should trade about $50,000 per week ideally, and no less than $35,000 per week. If less than that, your ability to ever breakout even or better is likely nil.
- 2. After you decide on a stock and it fits your criteria, decide on a profit percentage that you are comfortable with. That might be 10%, 15%, 20% or even 50%. Make sure you add both the fees for buying and selling into this decision. This percentage should take that into account. Let’s say it trades at $1.00. With fees you calculate that the gain you want is 20%, making the price with all fees about $1.24 per share to get that potential gain. Ask yourself, “Do I really think it can trade at $1.24 soon?” Ask another question, “I want to buy 5000 shares of this, and it typically trades 35,000 shares a week. Will my buy drive up the price and will my sell drive down the price?” The answers to the volume questions needs to be no.
- 3. Buy after about the first hour. Don’t buy late in the day. After reviewing Number 2 above you got all of the right answers, place a buy order that likely gets you the number of shares you want at near the lowest price of the day. Yes, you never know what that is going to be. You have to look at how its traded. Note that you may not get the shares at all if you are trying to get them at a lower price than the market would like to give them to you. Personally, I have always felt it was a bad sign if I got the shares too easily. Let’s say you got the shares at the $1.00 price you wanted. You are so lucky, right?
- 4. Now – you see the confirmation come in. Yes, you are now an owner of the next AAPL! Love sets in. Don’t fall too deeply, it’s time for that sell order. Yes – you just bought the shares, now put in a GTC (“good til canceled”) order to sell the shares. Here you will simply put in an that is good til cancelled for all of the shares at the price of $1.24. Note that the very momentum of buying will often propel others to buy, and your sell order may be filled the same day as the your euphoria spreads to others. That’s good. No – that’s great. You lock in a profit and you are out.
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