![\"aigbuyprogram](\"http:\/\/www.smbtraining.com\/blog\/wp-content\/uploads\/2009\/10\/aigbuyprogram-10-29-091.bmp\" "\\"aigbuyprogram")
<\/p>\n","protected":false},"excerpt":{"rendered":"There are many facets to being a successful trader.\u00a0 One element that tends to be neglected by aspiring traders is the concept of position management.\u00a0 Position management is a combination of observation and action.\u00a0 A trader must observe the price action in both the market and their stock to determine whether or not to take action on an open position at any given moment.\u00a0 A trader should consistently be asking themselves the following questions:<\/p>\n
1) Where should I take profits if the trade is working?<\/p>\n
2) Where should I take losses if the trade is not working?<\/p>\n
3) Where should I add to a (winning) position?<\/p>\n
4) Where should I get completely flat?<\/p>\n
Some may think that a trader should have considered all of the above prior to initiating a position.\u00a0 They would be correct.\u00a0 But the difference between having a detailed trading plan and managing a position is a function of time.\u00a0 When you establish a detailed trading plan prior to entering a new position you are only able to consider that which has already occurred.\u00a0 Once a position is opened there is a lot more information to be gathered.<\/p>\n
Today I was short AIG because there was concerted selling on the tape around the 36.40 level.\u00a0 Based on yesterday afternoon’s price action I knew that there was downside to around 35.10.\u00a0 I was willing to risk 15 cents on the trade for a potential gain of $1.30.\u00a0 AIG traded down fairly quickly to 35.70 where I covered some of my position.\u00a0 AIG has a tendency to retrace fifty cents or more after a hard down move so I was confident that I would be able to reestablish the shares I had just covered at a more favorable price.<\/p>\n
I continued to manage my short position until around 11:00AM.\u00a0 I then noticed something on the fifteen minute chart.\u00a0 AIG appeared as though it was bottoming and could possibly be about to reverse.\u00a0 I started to pay closer attention to the tape.\u00a0 I noticed that a buy program had been turned on.\u00a0 It was a pretty silly program.\u00a0 It was stacking a bunch of multi thousand share orders a couple of cents above the bid in an attempt to accumulate some stock on the bid.\u00a0 But no one was taking the bait and hitting the 36 bid.<\/p>\n
I decided to test my theory about the accumulation program.\u00a0 I hit 1,000 shares at 36.\u00a0 The bid quickly dropped to 35.94.\u00a0 I immediately went high bid to 95, 96, and 97 cents.\u00a0 No one was interested in hitting my bid and the accumulation program was bidding above each of my successive high bids.\u00a0 I paid the offer at 36.02 to get flat.\u00a0 The bid stepped up and I paid to get long when the 36.05 offer lifted.\u00a0 The stock quickly traded up to 36.15.\u00a0 I then placed a bid at 36.06 under the assumption that the accumulation program would not allow AIG to drop below 36 again.\u00a0 My bid was hit six minutes later.<\/p>\n
AIG began another up leg about three minutes later that took it straight up to 36.40.\u00a0 I ended up making more money on my long position than I had being short for the down move.\u00a0 If I was not in the practice of consistently reevaluating my position I would have failed to cover my short prior to the up move to 36.60 and I certainly would not have been long.\u00a0 Trading is not as simple as looking at a chart and opening a position and then placing a stop order.\u00a0 You must be diligent to adjust your trading plan based on new information as it is received.<\/p>\n
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