| GUIDEPOSTS |
|
HISTORICAL GL's
|
| TUTORIALS |
|
BASICS FUNDAMENTALS TECHNICALS ROLLING TC-2000 OPTIONS |
|
Scroll to the bottom of this Guidepost for an easy way
to ask for clarification on any questions that arise!
Greetings, fellow Pro-fundity team members - 03-04-05.
See Advanced Tools (Be sure you are using revision 2.5!)
- Last week we closed sharing a short test-portfolio of three tickers selected as a Sell Point example. Here is what the Portfolio Summary Sheet looked like after one week:
Fig. 1. SellPoint Portfolio Summary Sheet 02/25/05. - The big lesson here is the importance of placing the stop-loss as quickly as possible after your stock order is confirmed. IIG suffered a devastating drop the next day. Had we waited even one day to place the stop, the damage to this portfolio may have been irretrievable. As it was, the loss remained manageable. The next figure shows the result one week later.
Fig. 2. SellPoint Portfolio Summary Sheet 03/04/05. - In this case, the loss for IIG is fixed, it will get no larger, because of the stop mechanism. We see price increases for both FON and WFR. After commissions have been paid, we are still 1% down. Not bad with the IIG loss. Lets look at the price charts for the two remaining tickers.
Fig. 3. Price chart for FON. - This chart, showing the modest increase since last Friday, still shows promise. The reason to look at our picks at each day's end is to ask the question, "Would I still buy this stock the way it looks today?" If the answer is yes, wait for SellPoint to do its magic. If no, we can always make the decision to exit before the SellStop loss point is reached. In any event, we have the safety-net with the stop. The next figure shows what the SellStop spreadsheet looks like for the FON activity.
Fig. 4. SellPoint spreadsheet for FON. - Notice, the stop point increased twice during the week. On 3/1/05 it jumped from $22.00 to $23.30. Our action that night was to increase the stop on FON. That took five minutes. The next night, 3/2/05, we increased it again, a measely one cent to $23.31. Why that little amount? Discipline!
Fig. 5. Price chart for WFR. - This chart shows the dramatic increase and market strength for WFR. We want to let that baby run. Since we put the IIG funds into WFR, we placed a separate order for the increased position. The next two figures show the SellPoint spreadsheets for WFR.
Fig. 6. WFR spreadsheets. - Notice, we have two different sell-stops for the same ticker. This is because the starting point or buy price was different for the two positions. You are free to set your stops as you wish. This is an easy fix. Simply combine the shares of both orders into one spreadsheet, choosing a buy price that best reflects the entry. Or, you can treat the two positions separately as shown.
- The importance of keeping commissions as low as possible is illustrated in the next figure, where we've repeated the SellPoint Portfolio Summary Sheet with $1,000 investments in each positions. This punches up the power of SellPoint as we do "What if's?" If we had invested $1,000 each instead of the $200+, we would be ahead by 4.6% in two weeks. What kind of an APR return is that?
Fig. 7. SellPoint Portfolio Summary Sheet 03/04/05. - To reinforce the importance shown in Step 1 above, here is the price chart for IIG. Remember, we liked this ticker on that Friday 2/25/05. We've done a post-mortem to understand why, but are unable to see how we might have forecast such a negative. There was one small feature, had we listened to our own trading tips, that could have (should have) prevented it. "Never buy a stock on a down day. Make the price demonstrate strength by turning up first." That means we should never anticipate a bottom before buying, but be able to SEE it increase. Had we waited for the uptick, it would never have come! See the black candle by the arrow on that day. Best case, "stuff" happens!
Fig. 8. Price chart for IIG. - More "lessons learned" going forward. Enjoy!