Monday, November 21, 2005

Pet Stocks

It’s easy to fall in love with a stock when it treats you right. We all want a little TLC, don’t we?

In my trading past, I would make a good trade and, once I was out, couldn’t wait to get back into the same stock because it had treated me so well. After all, I must have really figured that one out. Yes, it was a quality chart pattern. Yes, the stock was in an uptrend. Maybe I just have a real feel for that stock, I would tell myself.
I still see this regularly in other traders after they pull a few points out of a trade from my stock newsletter and immediately ask when they should get back in. The answer is, maybe never!

If the object is to make money, which it is, then we have no room for pet stocks. Why show favoritism toward a stock which worked in the past but may not be the best place to put cash right now? If your trade produces a winning stock, congratulations! Keep an eye on that stock, it may set up again soon. Just don’t be captivated by every tick, itching to get back into it. Don’t decide after one good trade that you must have that stock figured out. Such an attitude is bound to cost you, and you may find that you become a stuck holder for a little while if you jump back in too early.

Trade only the best technical setups. Put your trades on, and keep a stop-loss order in place. Let the trade develop, and when it’s time to take profit, be willing to move on to the next trade.

There’s no room for favorites in the trading game. If a stock keeps setting up for good risk/reward trades, then by all means continue to trade it. The trading error occurs when your fond memories of a profitable trade in XYZ stock cause you to forget your trading rules and buy under imperfect conditions.

At, we find the best setups for swing trading and list them when their chart patterns indicate it’s time to buy. Sign up today for your free trial to our stock pick service and find out how we make our living as traders!

Jeff White


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