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Stock Trading Questions - Ask the Pro

  • Parent Category: Articles

Is Now A Good Time To Make A Trade?

stock trading questionRecently a comment came across my Twitter feed in reference to an exceptional trade that the OP (original poster) was riding. Here's the comment:

"Lesson : Don't ignore 52 week high strength when overall market is weak."

The OP is certainly on a great trade and he's a good trader. However, it also offers an insight into a very common bias that most new or inexperienced traders can fall prey to; that is, that it's okay to buy a stock making a 52-week high when the broader market is weak. 

Unfortunately this is a classic example of Data Snooping which is a sub-set of Sample Bias. In layman terms the OP has made a single observation then extrapolated the conclusion to be a firm rule.

What we need to know is whether or not this observation was just a random occurrence or whether it does actually have statistical merit.

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  • Parent Category: Articles

What Should I Do If I Miss A Signal?

stock trading questionA common question we get when trading longer term momentum style strategies, such as the Growth Portfolio, is how to manage a missed signal.

Do we chase it?
Do we stand down and wait for the next signal?
Do we buy it if it’s below the original entry?

It’s an important question because in a strongly trending market a position may remain open for extended periods and not allow a secondary entry from the system itself. A recent example is the trend in Telstra (TLS) that was caught in late 2011 and ridden through mid-2015. With the addition of dividends, this was a quality trade that worthy of catching, but without a secondary entry trigger some way to hop on the ride is needed.

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