Position Management

I do quite a good job in finding various candidates to go long and to even short. I do quite a lousy job in managing my positions. Nona noted that in one of her comments to the "On Mobility" post. Position management is so critical to good results. As a beginning investor, this is a key skill to master. I have a tendency to sell to soon as Nona notes for herself.

I know that stop losses are critical. But on some of the stocks that I have owned, I have noted that my stop loss has been hit deliberately. It happened to me twice. If I cannot manage a position (s-t horizon), I'll put a stop loss on it. Otherwise, I'll baby sit it. (Perhaps I suffer from paranoia).

I recently identified USAP as a short candidate. I shorted it at $34.56 today it closed at $32.88--but not before going up to $37 and scaring the bejeebers out of me. The price action made me doubt my thesis, but to be fair $37 was the jumping off point. But the stock's RSI was turning down, and I should have used that technical indicator to help me gauge risk.

I'm trying to develop my confidence in shorting because I truly believe that if you can make a reasonable short/long case for a stock that gives you all the better insight into managing the risk of your position. And if one case does not emerge stronger than the other, then there is no discernible advantage to either, and you should move on. Barry Ritholtz in his Apprenticed Investor Series notes that you should learn to short.

As Nona points out, any position that you take, you should be clear about your parameters. If you are consistent, you will roll with the odds. It's like Black Jack. If you sometimes take a hit on 16 and sometimes do not, you screw up your long term odds. So consistently do or do not take a hit on 16. So if $37 was my jumping off point (and it was), then I did the right thing and should not be second guessing. But I do think that my parameter should have been better packaged--$37 and improving RSI, rather than $37 and declining RSI.

There is a book that I like alot. It's called the Logical Trader. Fisher has a terrific system (I think anyway) in helping you identify the trend. If you have not added this book to your investing/trading library, I would highly recommend it. I actually created an excel spreadsheet to put the principles to work. Unfortunately, my hard drive crashed. I'll have to develop it again. You can find the book here.

http://www.amazon.com/Logical-Trader-Mark-B-Fisher/dp/0471215511

Kookmin continues to act well. I also started a position in BFT (Balley's Total Fitness). I did a little research on them through Bill Cara. I thought they were a dog of a company, and they indeed crashed. They are a likely buy out candidate, and I can hardly imagine that the news would get worse.

My gold stock KRY perked up some today. With all the Iranian saber rattling, that is bound to happen. It is a very volatile stock.

--a little stock talk given that I've been prattling about other unrelated items.