Sell rules

Hi Marty

I am trying to set stops to try an avoid procrastination on exit. I am aware of various strategies such as moving averages, low of day/week etc. but have recently been trialling stops based on the average 14 day ATR. That is I am setting my stops at 2 * the 14 day Average True Range. Do you think this method has any merit and  are there situations I should be adapting or should watch out for false signals here (I still sometimes get shaken out on stocks I have larger gains on for example prior to a further up move - so where gains are >15% maybe move to 2.5*ATR?).

Any thoughts on this gratefully received.

Thanks

Mark,

I am sorry for the delay in answering your question as this was in the "spam" folder (not sure the reason).

Yes, I do believe that is a valid strategy for placing stops. However, no system is perfect and stocks will shake us out regardless of strategy. I have learned over the years to buy the stock back immediately if it reverses and starts heading higher.

We are seeing quite a few vicious shakeouts and reverses (Jesse Livermore Shakeout plus three or 10%) like the one in ESTC on May 30. The stock dives below its 200sma and trades down to $92.96 on May 30. That type of action wil shakeout most swing traders and some longer term investors. But it reverses and trades at a high of $107.00 the very next day. That is a 16% move in a day. We do NOT want to be shaken out of our stocks. Therefore we must have the discipline to buy our stocks back when shaken out and it reverses.

Regards,

Marty