Managing A Winner

There’s never much discussion or analysis of a winning position on the interwebs.  Mostly we just get the end zone dancing, which is about the only thing I enjoy in football.  That and Mike Vick like five years ago or Barry Sanders in the early nineties. 

Trading psychology books often state as fact (What’s really a fact in psychology?  I mean come’on, I eat brains) that the sting of a loser stays with a trader much longer than a win of equal proportion.  Perhaps that’s why we pour over a loser, or hold memes like “There’s always a lesson in a loser” so tight.  I certainly learn from every trade, all kinds.

With that in mind, let’s take a look at a ten bagger I traded this week, Riverbed Tech — ticker symbol RVBD:

I’ve marked points where I’ve scaled, and I’m still holding a 1/3 position. Going back to psychology, I need to lock in gains along the way. It feeds my craving for instant gratification. Therefore, I always scale out at logical price levels. I figure I can always reenter the trade. HOWEVER, once I get down to my runner, it becomes a matter of conviction in the name and the picture the chart is presenting.

As I noted, the $20.00 level is the next logical scale point and I may sell there. But I may also stick around the name and ride a pullback, eventually reloading my position. If you pull up the weekly chart, you will see a significant amount of price confluence at $20.00. It’s a very logical scale point, perhaps too logical. Therefore, given the magnitude of the pump and the bleeding logic surrounding the “big round” $20.00, I may go for a fill of the above gap.

Study your winners just as much as your losers.  Don’t beat yourself up either way.  Remember, the holidays are about forgiveness.