Thursday, October 4, 2007

To sell or not to sell

As my trading system works on weekly charts, signals are received on the last day of the trading week which is Friday. I believe a sell signal will be generated by the system tomorrow for SSTR (see this my previous entry for more info). The reason for this, is my stop loss rule which sell a position if the closing price drops below 10% of the entry price. On the first day of this week SSTR dropped more than 20%. My assumption was that the stock will recover during the week, and if the price wont get back to last week levels, it will at least go back into the range of -10% or above. I bought the stock on 4.15 so I'm not worried about the loss my portfolio will suffer (if any as the current price is around 4.05), but whether I should have entered this position in the first place.

Actually, the real question is whether I should add another filter to the system so it will ignore signals for stocks which gained more than X% on the entry bar.

This calls for further investigation which I intend to do tonight. I'll post my results tomorrow.

As for whether I should sell or not? Of course I will. As I said earlier, There is no discretion with computerized system. My endless tests showed that on the long term my system win and as I am here for the long term so I'll stick to what the doctor ordered.

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