The Art of Speculation (Part 1)

05/28/2008 12:00 am EST


Ron Ianieri

Founder, Ion Options, LLC

Last month we talked about becoming a better trader.  Confidence, money management, and risk management were some of the key points we talked about.  We also talked about analyzing your methodology to improve your trading.  This is in regards to your entry and exit signals.  If you can analyze your signals to improve your trading, then you have more confidence in yourself and your system.  A good entry signal is important to getting the trade on, but the exit is where you can make or break a trade.

There are several types of orders out there that can help you with entries and exits.  The most basic order when buying is to purchase at "market" or "limit".  As most of you know, the "market" order is filled at the best price when it goes to the market.  The "limit" order is filled only if that bid matches up with the current offer.  If not, then the order will sit on the book for the time frame that you specify, either for the trading day or GTC (good til canceled).  Some execution systems allow you to put a date to cancel your GTC order.  These market or limit orders are good for both entry and exits.  Depending on your trading style and how confident you are in your targets, then you may want to explore different methods of getting in and out.  For example, if your signal requires quick action and you are in volatile markets then you may choose to enter on a market order.  But if you are waiting for a stock to retest a specific price level then you may want to place the limit order.  This goes for exits as well.  If you are currently long and waiting for the stock to lift up to the resistance level, then you may want to place your GTC sell order up around the resistance level. 

More tomorrow in part 2.

By Ron Ianieri
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