Ask Colin

What tactics do you have for buying once you have picked a stock to buy?

This depends a great deal on what you are trying to do. The answer for a short-term trader may be quite different to that for an active investor, for example.

For short term trading, I think that a very good method is that advocated by Dr Alexander Elder in his book Come Into my Trading Room. Here the key is to place uy orders near the 22-day EMA.

For active trading, as I do myself, I am looking to enter in two or three lots. The three entry points are (1) on the initial breakout or any new high in an uptrend. (2) on the next correction and (3) on the next new high in the uptrend.

I will tend to buy about a third of my position at each point, which keeps the risk low until the trend starts to be confirmed. However, I may be prevented from doing this by my money management rules.

Actual buying tactics are usually to buy "at market", which, on the Internet, means hitting the offer. However, if the spread is wide, or the offer a long way above both the last sale and the bid, I will place a limit order in the spread.

I must caution you that this is a very sketchy outline of what I do, which is explained in more detail in my videotaped seminar. Also, what I do in this area is related to my strategies for risk control in other areas of my trading plan and should not be taken in isolation.

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