You have a finite amount of money. I don’t know how much it is — but unless you are a gazillionaire (yes, that’s a professional term) — then your capital is limited.
Because of this you can (and should) only trade a few choice stocks at a time. You do this by narrowing down all 7,000 stocks trading on the major exchanges, picking the ones you like and taking those trades.
But what happens when, for whatever reason, you fail to pull the trigger and you miss taking a position in a stock you like — and it blasts off without you?
And runs 10%, 20%, 30%, 40%, 50% higher?
And you sit on the sidelines and want to throw up!
What do you do then?
Well, lucky for you I’ve got some answers that I think you’re gonna like — and none of them involve breaking your keyboard, yelling at yourself in the mirror, cussing at the market or being mean to your family — not like I’ve done any of those things!
So here they are — 5 things you can do when stocks take off without you —
1. Don’t Chase
Whatever you do, don’t chase after a stock that’s left the launchpad without you, because you’re going to get hurt.
Either you’ll feel too nervous to manage the trade properly, or it will crash the moment you get in.
In Dan Zanger’s trading tip number 2 he suggests never buying a stock that’s up more than 5% over the breakout zone.
What’s the breakout zone? The last period of price resistance, and it looks like this:
Notice how on this chart for $ASTC price has already blasted off way over the breakout zone trend line?
That means price is over extended and not a good place to take a position.
2. Be A Stock Stalker
Yes, this is one of the few times in life that it’s okay to be a stalker! NOT after your girlfriend breaks up with your for spending too much time trading. lol.
So how do you stalk a stock?
Once you see a stock that’s left the station without you, put it on your watchlist and begin checking in with this stock every day.
Most charting services now have some type of alert service that you apply directly to the charts in your watchlist. For instance, Telechart allows me to turn any trend line into an alert signal.
If price passes that line, I get an email.
3. Watch For Continuation Patterns
No stock, no matter how awesome it is, goes straight up without periodic price consolidation breaks. It’s during these times that you can look to take a position, or get ready to buy new highs.
What does a consolidation or continuation pattern look like? In the ASTC position above, let’s see what happens after the initial breakout:
See how after the breakout, price settles down and forms a nice price channel? This is a consolidation pattern.
If it’s going higher, here’s where the big funds are accumulating their positions. You can do the same thing. Or you can wait until price shows signs of hitting new highs.
4. Buy New Highs
Once you’ve spotted the consolidation, buy a breakout from that consolidation and set your stop just below it.
Then you are in! No stress, no worry.
You didn’t have to freak out that you missed your trade and you didn’t have to have an anxiety attack because you bought an over extended stock that was going parabolic.
Take a look at this breakout from consolidation:
Look at that awesome breakout from consolidation. Can things get tricky around this second breakout?
That’s why I like to get in a little early (which comes with its own set of challenges). Or I set an alert on the top trendline and I try and get in as close to that break as possible.
Not only that, even if I miss THIS breakout, I can rest assured that if I have found a strong stock, these patterns will repeat over and over again.
Look at ASTC — even after the second breakout, price takes another rest for a couple days in a mini consolidation, offering ANOTHER chance for entry.
See what I mean? Most of the time there is always another chance for entry.
But what do you do if you have missed ALL of these opportunities and price is STILL rocketing higher without you? You do the only thing you can do…
5. Let It Go
If all else fails, and you can’t use this method to get a good position in a trending stock, let it go.
It’s okay. There are 7,000 stocks trading on the market — there will be other chances to find a good position trade without risking your capital in a less than ideal set up.
So instead of chasing the stock higher and freaking yourself out, try and determine why you didn’t take a position to begin with, while you had the opportunity.
Maybe you didn’t feel that confidant in your trade idea. Maybe you were trying to take too large of a position. Maybe you were trading outside of your experience level. Maybe you were trading with money you couldn’t afford to lose. Maybe you hadn’t accepted the risk.
All of these things will affect your ability to take a position. But not to worry.
A new opportunity will come along and a new chance to take a position in a future possible high flying stock.
Until next time, good luck out there!