Sell Stop:(GU)

I stopped out of (GU) today for a 5.4% loss. This stock was up as much as 11% intraday from the buy point (16.16) in the time I owned it, but never closed above 17 and never got much traction. It usually takes me some time away from a trade before I get an idea where I might've gone wrong. Looking at it, the company is a bio-diesel play in a top five industry group while the biggest story going is oil prices and energy. Looks like a no-brainer, and it's a good lesson in why it's a good idea to cut your losses - no matter how good the story is, if a the market or a stock rolls over you can get creamed.

I think this might be a case of right stock, wrong time. I've followed a lot of good looking stocks that broke out the past week or two only to collapse soon after. That should've been my sign not to put any more money at risk. Next time when I'm so apprehensive to make another buy, I will take the more conservative approach.

I'm also pretty sick of the add-on buy within 5% of the original purchase. I don't think I'm going to do it anymore. I think I'm going to manage my money like this:

1) With my current portfolio size, I'll own a maximum of three stocks
2) My initial purchase into a stock will be for 20% of my overall capital, as close to the buy point as possible
3) If the stock works, and offers an additional buy point, I'll purchase another 10% of my overall capital - that will complete my position with one third of my capital in the stock
4) If a stock is really working well, I may divert another 10% of my capital to it at the next buy point, and so on

This suits me better, I think. It has me going in slightly stronger that recommended in the beginning, but since I don't follow up the initial purchase until I'm well ahead, I should quickly be either out of the stock or reasonably allocated.

I also think I will move my stop loss orders a little tighter. When I pick the right stocks, they seem to take off and not look back. I think past the first day or two after my purchase, if a stock is still flirting around below the buy point I just want to cut it loose and move on. I'm still thinking about this one, and tend to place my stops situationally rather than by a hard and fast rule - of course never more than 8% below my purchase price.

I took a beating on (SOL) today to. It's one thing to talk about how I'm going to hold on to a big winner for a long stretch, it's another altogether to watch my gain evaporate from 92% to 50% in just three days. Ouch. I think I need to turn off the ticker and just check the chart in the evenings or I will have a bleeding ulcer by the Fall. If I'm right, it will find support at the 50 dma. If I'm wrong it will hurt, I'll recover and learn from it and move on. I must view this process as a marathon rather than a sprint.

I'm never as smart as I think I am on the good days, nor am I as dumb as I feel today.

I'm not looking for anything new now, the market's in a correction and it's just a waiting game at this point. I have never held a stock more than a couple of months, so it's almost relaxing to resign myself that I'm in for the long haul on (SOL) and (SOHU). Of course the market will dictate how long I hold them, but I think I'll last longer in this business if I find a winner or two and ride them for awhile then keep searching constantly for the next fast buck. You can make money either way, it's just a matter of finding the style that suits you.

-Geoff