The point of showing my order book yesterday was to emphasize how my number one focus is always risk management. At the time I entered many of the stocks, I expected them to continue to trend for most of the day. Even with expectations for continued movement higher, I sold partial positions into strength early on. I tend to go in aggressively as momentum builds and then scale out into continued strength. It is never my thought that I am selling at the top, instead, I am trying to reduce risk by realizing some profits and reducing my exposure. There are many times that a stock will continue to go higher without me and I am comfortable with that because, as we saw yesterday, the market can reverse quickly and erase all profits if you do not aggressively manage open positions. Some people say “winners take care of themselves” and that is nonsense. The attitude of complacency will allow many winners turn into losers.

My biggest mistake yesterday was to purchase ESLR and YGE in the pre-market. I chased both of these stocks higher as they gapped up and I have found that most of the time I buy before the 9:30 open I do not have good results. I am usually not at my desk until 30 minutes opens on a Monday, but yesterday I sat down early and I became anxious to participate as I saw the solar stocks gapping higher.

Yesterday I was extra cautious with my long positions because the moves seemed “too easy” in too many issues. When the moves come quickly, confidence is high amongst the unprepared and reversals are often close by, “when life looks like easy street, there is danger at your door.” As the saying goes, you want to be confident when others are fearful and fearful when others are confident. I do not think you want to be “fearful” ever, fear is one of the emotions which indicates you should have taken action earlier. Instead, you want to be on “high alert” for signs of weakness and yesterday it was the hard reversals in solar stocks at about 1:40 PM which showed reason for concern. When the leaders of a rally break down it breaks the confidence of buyers and other stocks follow lower.

Want to know more about position management and what to look for when it comes time to exit? I know a good book..