When you place a buy price for a stock, do you place a buy limit so when it hits that price its executed or do you wait till it closes at that price? (December 12, 2001)

  Yes. Actually, sometimes we do one, sometimes the other, and other times both. On breakout plays we like to set a buy stop at our buy point and let the stock move up through resistance and trigger the buy. Many times we will do this on part of a position, particularly if we think the stock may make its move early or we won't be around. That way we get a partial position on the move. Now if it continues to move well, we can then come back in and take a look in the afternoon and see if everything is looking good. If it is, we can add positions then if it is still within the buy range (within 5% of the pivot point) or wait for a test the next session or later. Remember, however, that 50% of the time a stock does not test the move; it may just run away from us.

Also, it can test the breakout intraday. Let's say we buy some of the stock as it breaks out or we miss it. Do we chase it? If it is looking good and the market is in an uptrend, we will often put a buy limit at a price just above the pivot point, say 25 cents to 50 cents. Then if the stock comes back to test the move we can make a buy without having to be there to watch it. Now it can crash back through the pivot point; that is why we like to see the market in good shape more or less as it is today.

So, we sometimes set buy points to catch the breakout on strong patterns using buy stops, and we also buy on the intraday test of the move if we miss the breakout, and we also take a look late in the session to check price and volume to see if we want more positions.


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