wallmann

Do not lose more than 8% (10% max.) on any stock that is
above $15. You will automatically adher to this rule if your stop
losses are strictly administered. The "stop loss" is the the tool that we
always use as insurance against disaster. As a short term trader who utilizes
the stop loss, you will frequently experience being stopped out of a stock,
only to watch it quickly rise again. Unfortunately, this is a reality we
must face and learn to live with. Why? Because this scenario is
here to stay. When playing stocks over longer time frames, you can afford
to give a stock a greater degree of latitude, because time becomes more
of a positive factor. However, when you're playing stocks over several days
(typically 2-10 days), you cannot be as generous with your risk parameters.
This is why we place such a great degree of significance
on stops, even if it means occasionally selling stocks near the low of the
day.

At times, we may feel quite strongly that a stock which is about to be
stopped out is still an excellent hold over a slightly longer period of time.
And if we are willing to extend our holding period a bit, we will decide to
sell only 1/2 of our current position at our stop loss. The
remaining half will be given a wider risk parameter. This partial sell
technique typically accomplishes two things. First of all, it lightens the
burden of our loss by exactly 1/2. At that point we are dealing with only
a portion of our original problem. And a portion, as you well know, is a
lot easier to deal with than the whole. Secondly, it gives the stock an
opportunity to come back, as many of our stocks often do. While we
don't want to minimize the importance of taking your lumps quickly and
moving on, initially selling only 1/2 of a very strong stock on the downside
can prove to be a wise choice. Just remember. Everything has its price,
and this revised stop loss technique is no exception.

Never let a good gain in any stock turn into a loss. This
should be self-explanatory. It is hard enough finding issues that go in the
desired direction, without allowing those that do to turn into wicked losers.
Once you have a good gain, consider yourself free from the
possibility of loss. At that point you can either adhere to the rule
above, or even sell it all. But whatever you decide to do, never ever let a
profit go sour. It's simply not smart.