Monday, February 26, 2007

Good Until Cancelled (GTC) Orders Psychological Price Points

core position trading,cpt,aim,automatic asset allocation,automatic investment management,Lichello,Robert Lichello,buy low sell high,stocks,stock market,exchange traded funds,etfs
It is important to set your AIM transaction GTC buy and sell points at psychological price points, whenever possible.

I use AIM (Automatic Investment Management) to "force" me to buy low and sell high. Someone "forced" me this afternoon to sell him some PAAS at $31.84, my GTC sell price. I had that order in for some time. The price was just touched this afternoon, then backed off substantially. But my order was filled.

If I had set the GTC at 31.85, a "nice round number", my order would not have been filled today. It might have not been filled until tomorrow, next week, next month, maybe never... Who knows?

For SELLS, I suggest setting the price a cent or two below nickle and dime prices. For BUYS, a cent or two ABOVE nickle and dime prices.

Frequently, the "even" nickle or dime price may be approached but not hit. The price you set a penny or two away may well be hit. Even on 100 shares, the penny you may "lose" by taking a price that is likely to be hit rather than waiting for the even nickel or dime or even a penny or two on the other side, amounts to only a buck or two.