# Argh beginner making a mistake! Need advice plz? :)



## sirpollicles (24 March 2011)

Hey all! This morning i bought stocks in ILU for 11.82. The last few days howeverr they have just been rising and rising. Right now they are fetching 11.54ish. Should I sell and cut my loses or play it out til the end of the day and see what happens?
Also what actually causes this big down spike in the market?

Thanks guys! just found this site. hope its good! lol


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## prawn_86 (24 March 2011)

Why did you buy it?

What was your reason for the trade? Stop loss? Time frame? Analysis?

Please note that ASF members cannot legally give financial advice, so if you are after buy or sell advice please contact a licensed financial advisor.


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## Joe Blow (24 March 2011)

Sirpollicles,

Please note that ASF members are not permitted by law to advise to you buy or sell any stock, nor are they permitted to provide you with any kind of specific financial advice.

The only people legally allowed to do this are licensed financial advisers. If you feel that you are not capable of making these kind of decisions on your own own, it might be a good idea to consult one.

Please refer to the following links from ASIC's consumer website about getting good financial advice and choosing a financial adviser:

Choosing a financial adviser
Getting financial advice


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## matty77 (24 March 2011)

What was your plan BEFORE you decided to buy the stock?

long term or short term?



While we cant give advise on particular stocks I would suggest you do some research and actually have a plan of action next time before you buy the stock. You dont buy something and then think about the what ifs...

Good luck.


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## Whiskers (24 March 2011)

I would hardly call it a "big down spike", but I agree with prawn. What was your plan and reason for buying?


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## Logique (24 March 2011)

Sirpollicles,
a lot depends on your strategy, whether short or longer term, and your capital position.
For starters I'd say go over to the Iluka thread and have a read there.  

There's technical momentum behind it. But check the ILU thread, as I don't follow the stock day to day.


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## adobee (24 March 2011)

At a glance it seems to trade in this sort of range everyday ..  I dont think it is really a spike or that the trend of ILU has changed..  I dont follow ILU but its been a well performing share for the last year...  

I would follow my initial plan.. 
however if I need the $ to pay the kids school fees next week I would probably protect the capital..

IMO just comments on the stock no advise


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## Reasons (24 March 2011)

sirpollicles said:


> Hey all! This morning i bought stocks in ILU for 11.82. The last few days however they have just been rising and rising. Right now they are fetching 11.54ish. Should I sell and cut my loses or play it out til the end of the day and see what happens? Also what actually causes this big down spike in the market?




At least you are asking questions even if your timing is a slightly off. If you look at the chart below, there are several simple things you can observe that will help you make a decision now and should start to assist with any future entry into a share. 

This is usually a very well behaved share (not too many big candles or big gaps) that is in a very smooth upward trend, that is to say it is making higher highs and higher lows in the price action. 

The red and blue arrows show this share's price action tends to bounce off the red and blue moving averages (MAs) and does not stray upwards very far before moving down to do the same thing again. It is fairly predictable in what it does.

The price action then hit $9.50 which first acted as resistance and then as support. Point number 1 would have been the entry point for a number of traders & investors. Others when it retraced to $9.50 again and there was a big rush in at Point 2, hence the long candle.

The trouble with getting in where you did, is that if you agree (you don't have to) this share is reasonably predictable in its actions, and by buying in at $11.82 you have bought in a long way above where the share is likely to return to based on past performance. It is only probability that it will swing down again fairly soon as that is what it has done every time for many months. However, this time could be different and it could go to the moon. You only have past performance to go on.

There have not been any significant company announcements I can see to make this share jump for that reason, but who knows, there could be insider information that the market does not yet generally know that is causing this rapid move up.

What you have seen today is around a 4% move down at some point which can be a bit frightening if you have taken a large position in the market close to the top. The long bar at Point 2 was probably over 6% at a glance and therefore worse again.

It is highly unlikely that too many traders would have been getting in where you did today, but would likely have been selling as $12 is a big number and it is likely to act as resistance and go back down (but no guarantee or how far if it did).

So assuming you did not already bail today, your dilemma is to work out what to do. The bar at the top today is known by many things including an indecision candle. The bulls and the bears had a fight during the day and neither won. Tonight they will have a think about it and if the bulls get a bit nervous, the bears could win tomorrow and take the share down, or vice versa. The share price is also a long way up from its MAs and so on historical probability it could go as low as $10 (or as low as it likes). If you are ever unsure again, the best thing to do is get out straight away as close to your buy price and take your medicine if you lose money. Always do it quick and minimise your loss.

The main trick is to never be in a trade without a plan as has been pointed out above. With our rectrospectascope on, let’s say you took the trade at Point 2...

Money management and the protection of capital is really important and you seemed to be missing this aspect possibly? Let's say you decide that the support at ~$9.50 will hold, but you don't want to know about the trade if the price goes below support and decide that you will put your stop loss at $9.40 to give yourself a bit of wriggle room.

You get in at $9.60 (your entry).

Your 1st profit target is $11 (the likely next resistance), your 2nd is $12.

Using the above you have a 7:1 win/loss ratio or by buying 1000 shares the chance to make $1,400 or lose $200 if you are stopped out.

There is a bit more in it than that, but not a lot more in reality to a trading plan, but you need one next time and one that is tested to give you an acceptable risk/reward ratio that you can make money.

Hope that helps a bit more.

Cheers 

(PS - you could have just as easily entered a trade on any of the red or blue arrow points on a price pull-back and managed your trade as I showed you above.)


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## Gringotts Bank (24 March 2011)

No reason to sell a strongly up-trending stock like this.  Hold.  Top of channel is about $12.20.  I'd consider selling then if I was trading it.  Stop loss could be placed just under $11.40.  If you wreck the trade, big deal.  You've picked a good stock to begin with - an up trending big cap.

If long term holder, then hold.


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## So_Cynical (24 March 2011)

sirpollicles said:


> Hey all! This morning i bought stocks in ILU for 11.82. The last few days howeverr they have just been rising and rising. Right now they are fetching 11.54ish. Should I sell and cut my loses or play it out til the end of the day and see what happens?
> Also what actually causes this big down spike in the market?
> 
> Thanks guys! just found this site. hope its good! lol




ILU for $11.82 on a day when its hitting new record highs again (has been since late December) trend following when done in a long running trend can often be top buying, ILU has been trending up for about 12 months and today you decide to buy in, and at near the top of the daily range.

Why?

------------------------------------

I'm seriously very close to selling out of ILU and pocketing my 250%+ gain...just a little concerned about the tax implications...i hate the thought of a 4K tax bill. 



Reasons said:


> There have not been any significant company announcements I can see to make this share jump for that reason, but who knows, there could be insider information that the market does not yet generally know that is causing this rapid move up.




Your not much on fundamentals are you? Let me fill u in on the main points....ILU is/has


The number 1 world producer of Zircon.
The number 2 world producer of Titanium.
Recently returned to profitability and paid its first dividend in 3 years.
Zircon is predicted to double in price over the next 12 months.
ILU as the worlds number 1 producer cannot meet world Zircon demand.
ILU on the verge (i think) of inclusion in the ASX50 (ASX by market cap #42)

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Gringotts Bank said:


> No reason to sell a strongly up-trending stock like this.  Hold.  Top of channel is about $12.20.




What channel :dunno: its hitting al time highs....lol


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## Reasons (24 March 2011)

So_Cynical said:


> Your not much on fundamentals are you? Let me fill u in on the main points....ILU is/has
> 
> 
> The number 1 world producer of Zircon.
> ...




Absolutely untrue!

I always want as many funnymentals and funnymentalists behind a trade's momentum as I can get and pay for and use Stock Doctor for just that purpose - just don't like the idea of the possibility of a +15% pullback on the immediate timeframes we are working with in this instance for sirpollicles - not good for a beginners morale, money management and capital protection!


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## Reasons (25 March 2011)

So_Cynical said:


> What channel :dunno: its hitting al time highs....lol




My guess it is this significant channel. 




I don't know much about the behaviour behind these diverging trendline (megaphone) patterns, but I have read it is when the battle between buyers and sellers gets out of control after a trend has been going for some time. Anyway, only a possible 15-20% loss and roughly a 5-10 day wait to find out if it holds the bottom sloping trendline or the $9.50 support level; or falls through. My money is on you beating *sirpollicles* to the exit this morning.


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## AlterEgo (25 March 2011)

Reasons said:


> diverging trendline (megaphone) patterns




It's not diverging if you use a log scale though.


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## So_Cynical (25 March 2011)

Reasons said:


> My guess it is this significant channel.





Ok i suppose that's a channel...just not what i call a channel, more a range within a trend.



Reasons said:


> My money is on you beating *sirpollicles* to the exit this morning.




I just opened a sell order, what the hell tax is a good thing to pay right?


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## Reasons (25 March 2011)

AlterEgo said:


> It's not diverging if you use a log scale though.




Well done AlterEgo

That gets rid of some unknowns - now have you got something in your toolbox that defies gravity which we can use to hold up the price when required.


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## nulla nulla (25 March 2011)

So_Cynical said:


> Ok i suppose that's a channel...just not what i call a channel, more a range within a trend.
> 
> 
> 
> I just opened a sell order, what the hell tax is a good thing to pay right?




Taking money off the table when you are in front is a good policy also.


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## Logique (25 March 2011)

> From *So Cynical*: ...ILU has been trending up for about 12 months and today you decide to buy in, and at near the top of the daily range.



Yes an awkward entry point characterizes the trade, and sets up the whole dilemma. There's the lesson to be learnt by Sirpollicles.


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## Reasons (25 March 2011)

So_Cynical said:


> Ok i suppose that's a channel...just not what i call a channel, more a range within a trend.
> I just opened a sell order, what the hell tax is a good thing to pay right?




Just remember, it is only probability that it will perform this way based on past history. As I said earlier, it can do what it likes and even go to the moon. Probability means that sometimes you will be wrong.


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## skc (25 March 2011)

So_Cynical said:


> Ok i suppose that's a channel...just not what i call a channel, more a range within a trend.
> 
> 
> 
> I just opened a sell order, what the hell tax is a good thing to pay right?




I hope you have taken into account the CGT concession with holding >12 months. You've got to be close if you've made 250% gain.


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## Gringotts Bank (25 March 2011)

Did you sell where I recommended pollicles?  Good.  Profit on your first trade.


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## Reasons (25 March 2011)

Gringotts Bank said:


> No reason to sell a strongly up-trending stock like this.  Hold.  Top of channel is about $12.20.  I'd consider selling then if I was trading it.  Stop loss could be placed just under $11.40.  If you wreck the trade, big deal.  You've picked a good stock to begin with - an up trending big cap.
> 
> If long term holder, then hold.




*Sirpollicles*

As lots of people have told you, you need a good trading plan. But you have to have a backtested plan to become successful and very good money mangement strategies if you don't want to go broke. Protecting your capital is paramount to ongoing success regardless if you are just learning or a pro. Even Warren Buffett who is a value investor, has rules in this regard. His Number 1 Rule is not to lose money and Number 2 is to see Rule Number 1.

Had the market had a bad lead today for some global reason or ILU announced something negative, etc, you would have had a significantly reduced chance that you got today to get out higher. Big numbers like $12 are key resistance and support (not sloping trend lines that many others can't see or fundamentalists don't want to look for) and are likely to hold as people get ideas that this is where they want out as they have made good profits over time and the big round number sounds good to them. If you have a look at the order lines in the market depth on a share, you will see this all the time with larger than usual numbers of sellers or buyers with orders at these big numbers (at the 50 cent marks too).

As we don't know your timeframes, if you are a trading a share for short-term gains, NEVER have it in your head, even for a second, that if something goes wrong you will become an investor. Investors have long timeframes, share traders usually don't, except when they get caught without a plan and the share drops in price and they take no corrective action. A poor trader will then decide they are a longterm investor.

Every share you are holding longterm means less trading capital and a share that is possibly going down further in price every day. We have all done it at some point, but anyone who is a serious trader will not consider it as one of their finest moments and believe me, they hang round your neck like the proverbial Albatross to remind you of your stupidity. It is considered extremely poor money management and does not protect your capital.

If you are a longterm investor, you should still learn about where you have a better chance of entering to give yourself a better chance of the share going up. The best longterm investors all have good money management rules and will have stop loss rules, even if they are just set as a percentage of capital loss level.

If you intend to be a trader, the game is just about probability. Probability means that sometimes you will be dead wrong. The only way to manage the outcome, right or wrong, is to plan the trade and then trade the plan precisely without alterations. You should still have a good plan in place if you are a longterm investor. And it will sound a bit weird, but to be a successful trader, you have to like losing money, as it is a just part of your trading plan and win/loss ratio. Successful investors will tell you the same.

Hoping that because a share has been going up for sometime will save you from a bad entry and a share that is about to tank and go down for some time is at best wishful thinking and at worst a very bad plan if you intended to successfully make money.

Cheers


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## sirpollicles (25 March 2011)

i held it! stock deided to jump up of a monrning in the opening jsut like it does the last 2 weeks, i know you cant predict and just guess that it will have high demand in the morning orders, but sure enough. sold them at 12.25. Thanks for the help guys, i will really take in more consideration with holding my capital. I knew it already, and it went below my sell point and i just kept thinking to myself "what if it goes up" im guessing that is what most peoples brains tell them, even if your knowledge tells otherwise. I'm jsut lucky in this case. Luck runs out. Do what your instincts tell you and protect capital is the better way.

Thanks for all your help guys! slowly learning.....


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## sirpollicles (25 March 2011)

oh and ps to the people that were interested in my battle plan, it was indeed actually for a short sale.


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## So_Cynical (25 March 2011)

sirpollicles said:


> i held it! stock deided to jump up of a monrning in the opening jsut like it does the last 2 weeks, i know you cant predict and just guess that it will have high demand in the morning orders, but sure enough. sold them at 12.25. Thanks for the help guys, i will really take in more consideration with holding my capital.




I'm out today as well, also at the open $12.25 

https://www.aussiestockforums.com/forums/showthread.php?t=6067&p=621825&viewfull=1#post621825


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## Reasons (25 March 2011)

sirpollicles said:


> I'm just lucky in this case. Luck runs out.




You can bet your last trading dollar on that statement...



sirpollicles said:


> Do what your instincts tell you and protect capital is the better way.




...and *NO!!!* Do what your *plan* tells you. 

There are 2 types of traders that use their instincts; those that have gone broke and those in the process of doing so. Instincts are for birds.


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## Gringotts Bank (26 March 2011)

Reasons said:


> Instincts are for birds.




... and Space Coyotes.


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## sparkie (10 April 2011)

what a run up 

wish I made this mistake!!!!


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