YHOO and JBLU. LET THE PROFITS RUN AND STOP THE LOSSES.

Let profits run and stop losses are two basic rules in investing and trading.However there is some variants that I like to follow. One that I classify as very good consist of close half the position when a big gain is achieved and there is some evidence for a reversal.

I use as objective number, for a big gain, a return of more than 10%. For JBLU, where we study a short position suggested with a price close to 11.5 usd,we have since January in the week chart a strong down move without any correction. For that reason the probability for a move against us increase. Additionally,we have almost 12% of return,so, with this strategy we close half the position.

Other example from our suggestions that favors the strategy presented here is YHOO. Since the price we study as a potential good entry for a long position the return achieved almost 15%, but last days some strong move occurred against us and at the moment I´m publishing my thought´s the bid price is at 28.18 usd corresponding to a loss less than 1%. if we had followed the strategy of closing half position with a big gain (more than 10%) and when we have evidence of a reversal, we still have a good result with YHOO. In this case the suggestion for a investor that remains with all the position is stop loss at a very short negative return (less than -1%). We stop with a almost null loss because the reason for the long position disappeared.

Dates of previous discussions in this blog:

JBLU 11.04.2007

YHOO 25.01.2007

Thank you for reading our thought´s and remember that they are only for illustrative/educational purposes and although our historical results are very good,no system or methodology has ever been developed that can guarantee freedom from losses.