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On missing the boat

He who hesitates...

Since applying my new strategy for getting in and out of a stock position, I've learning that timing isn't everything, but it really, really matters.

indexes The major indexes in 2009

The year 2009 began badly, with the economy in freefall, but after massive intervention by the government, the markets turned around in March and are ending the year well: Nasdaq up 40%, Dow Jones Industrials up 17%, and the S&P500 up 21%. My own Trader Paul returns aren't so sunny — I dug myself into a very deep hole and, with capital depleted, it's been very hard to get out. But at least I stopped digging!

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I'm actually quite happy with my use of the Percentage Price Oscillator (PPO) to identify potential trades, but one of the most important things I've learned is to watch the chart for some time after it is turned up in the scan. An immediate trade decision often leads to a loss.

At the same time, waiting too long runs the risk of missing an opportunity entirely. A leap of faith — confidence, if you will — is still needed to act, once the chart starts to improve. (It also helps not to have lost 1/3 of your capital to "experience.") As an illustration, I present five examples of missing the boat.