In the VC industry, experienced investors often claim that ideas themselves are worthless without proper execution. The same is true for the stock market. Having a well thought out equity selection approach is a necessary, but insufficient condition for achieving consistent profitability. Finding new trading ideas is not enough. There is no purpose of having four-five stocks in your watch list if you don’t have a clear plan how to profit from them.
When are you going to enter: on a breakout or in anticipation? Can you afford to watch the stock in real time and do you have the emotional capability to enter when it breaks out? I like to enter in an anticipation of a breakout.
How much are you going to risk? Where are you going to put your stop? I like to enter my stop at the market order immediately after I open a trade. If I am stopped, I accept that as part of the game. I was either early or wrong about the direction. Mental stops don’t work with me as sometimes I can’t watch my stocks in real time or if I am watching, I might decide to give it a bit more room and lose more. I just know myself. Barring another flash crash, this works beautifully for me. It might work for you too.
Where are you going to exit and why?
– My position is automatically closed when my stop is hit, no questions asked;
– I will automatically sell 1/2 when the achieved gain is 3 times the risked amount; I will trail the rest;
– If my stock doesn’t move in the next 2-3 days after I entered, I sell. I have no intention to be in stocks that don’t perform.