Wanna Know| My Answer For When to Sell
Hi, tigers. I receive all your questions and find that most of tigers want to learn about how to decide when to buy and sell stocks.
@Ah Meng @rinl @aiyoh79 @maricel @LMSunshine and many other tigers asked when to buy and when to sell.
I wanna know when I should cut loss. There has been many schools of thought.
Let's learn together how to use this indicator on Tiger Trade app.
Some retail investors prefer to cut losses by setting a fixed percentage, such as a 5% or 7% decline. But fixed percentage does not take into account that different stocks have different volatility.
Some stocks with low volatility may indeed need a stop loss when it is down 5%; but for stocks with high volatility, there may often be a 5% drop in a day. Therefore, we should consider the different volatility of individual stocks.
The ATR indicator can take the volatility of individual stocks into account.
ATR Helps You Decide When to Sell
- ATR (Average True Range), as the name suggests, is the calculation of the true volatility range of each stock on a daily basis.
The equation for calculating ATR is complicated, but we don't need to do the math because almost all trading platforms provide ATR indicator. All you need to do is click on this button and choose ATR on Tiger Trade app
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On your desktop app
The orange line in the chart is the stock's daily ATR. For example,$Pfizer(PFE)$ current ATR is 1.16. It means that for the last 20 days, Pfizer's stock price fluctuated within the range of 1.16$.
Two Formulas of ATR Tell You When to Sell
1. The stock price you bought it - 2 x ATR= your stop-loss point
Take Pfizer for example, today's ATR is 1.16. Suppose we buy Pfizer at the current price of $49.66, the stop-loss price is: 49.66 - 2* 1.16 = 47.34.
When the stock price falls to/below 47.34, we should cut losses.
2. The price of recent high - 2 x ATR= your take-profit point
Again using Pfizer as an example, let's say you buy Pfizer at the current price of $49.66. Pfizer's recent high was $54.93; and ATR for that day was $1.07.
If Pfizer fell from the high to 54.93 - 2.14=52.79, you should take profit and close the position.
Note: I use 2x in this formula but you can set this parameter between 1-3 times.
Risk Warning
There is no statistical advantage to using ATR for stop-loss or trailing take profit. However, it takes into account the volatility of individual stocks relative to fixed percentage.
We should be aware that the stock market and the world situation are very volatile right now. With the possibility of a Black Swan event happening at any time, and we should not rely too much on the numbers.
However, it can give us a practical and actionable trading discipline.
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我还留着$特斯拉(TSLA)$这支股，虽然这支股表现差强人意，不过我还是一如既往看好它。
目前特斯拉的股价已经“崩溃”，投资者不应押注该股短期内会反弹。
特斯拉股票因为一些不利因素，导致特斯拉股票大暴跌，其实股价疲弱，这对看好者来说，这=是大减价买到好货。
危机就是机会，股票不会一直涨或下跌。就像之前大多数中概股也大暴跌，目前中国开始开放，中概股就像乘上火箭一样大暴涨。
相信在不久的未特斯拉股票也会出现非常剧烈的反弹！我会继续买入更多特斯拉股票作为长期投资！
1.你买的股票价格-2xATR=止损点
以辉瑞为例，今天的ATR是1.16。假设我们以49.66美元的现价收购辉瑞，止损价格为：49.66-2*1.16=47.34。
当股价跌至/低于47.34时，我们应该减少损失。
In exchange, I will share a simple indicator. First, technical term: RSI (Relative strength index). I am not going into the details of the computation as they could be looked up easily. But as the namesake suggests, it is about the strength indication within a certain time frame. The most common time frame is 14 days. However, 🐯 app uses 6, 16, 24 days.
Next, I will use a common ETF (AGQ) as an example. There are two charts, one main, one sub-chart. RSI is in the sub-chart. It is common to use 30-70 band. When the chart is below 30 (lowest band), it indicates a stock is oversold. Above 80 indicates overbought. With 3 lines, when all three crossed the 30 or 70 bands, the respective oversold and overbought becomes stronger. The chart below indicated that AGQ was oversold around Sep 2022, signalling a likely reversal of trend.
ATR
ATR , basically give you the average delta up or down price movement . Help you to set a target to take profit or cut loss.
Parameters
The parameters (1 -3) is your tolerance range. It gives you some idea when to cut loss or take profit. Set at 1 is probably no good bec you end up cut losses too often.
Set at 2 also mean you giving yourself roughly 2 days of leeway.
Pro /Cons
pro - simple . work better if the trend persist.
Con -
1. it doesnt tell you when is a good entry.
2. dont work for stocks that are volatile
3. skewed average for stocks that had recently big up or down over a period.
4. you should set the high at the resistance level instead
For short term trading, aka buying a stock based on oversold conditions expecting a reversal or change in character rally, set a stop loss just below a previous swing low. Be strict with this stop loss (1R) and dont adjust it lower as the price drops. Also avoid the mistake of dollar cost averaging into short term trades. Take profit at roughly 2R.
Also be clear on which are your speculative stocks, and which are your long term. Did you buy a stock because others said this was a stock that would go to the moon? Or perhaps everyone would own EVs in future and this company will dominate the EV industry? Its good to review your portfolio & investment objectives once in a while.
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