Why I Use Stops
September 28th, 2005 by BWV
I mentioned about two weeks ago that I was buying a pullback in Genentech (DNA).
The chart from that point in time:
Soon after, DNA announced some kind of surprise clinical data on a drug (why I generally stay away from biotech in the first place).. the news was positive, but the stock just went up a tiny bit. I didn’t like the look of it.. and a good re-buy point was only 40 cents above the quote at about 10am that morning.. so I took off 1/2 for a scratch. Then let go of the other half, for 1.5 point loss, selling at about $90 on the Sept 14 breakdown day.
Here’s what it’s done since then:
It’s obvious what would have happened had I not used some form of risk control.. I’d be sitting here, down a big % on the position (10-12% ?).. and fruitlessly hoping for a bounce.
I despise being in that position, that’s why stopping out for a 2% loss does not bother me.
This thing was actually a good risk/reward short at that point.. but I missed it. I’m simply not quite a good enough trader to completely switch gears on a stock so quickly.
No positions in stocks mentioned
