We recently profiled a trade by Covestor model manager Jesse Barkasy, whereby Jesse sold Tesla Motors (NASDAQ: TSLA) from Covestor’s Trend Following model. As mentioned there,, this model uses trend following and chart reading techniques. The model will take big risks investing large portions of capital in some situations.
We asked Jesse if he could provide some insight into his decision to sell. His response:
Here’s why I sold Tesla.
What I do is buy breakouts in stocks or ETFs. This model follows my IRA, so I cannot go short. I can only buy inverse ETFs to play the short side.
If a stock turns against me and begins to show me a loss or even the possibility of turning against me, I sell to protect my account from large losses. I can always buy the stock back if it resumes the trend. I will cut my loss anywhere between 1% and 7% if the stock does not move too fast and lose more than that.
There are enough situations where a stock will gap against an investor or trader with no warning, so to cut losses keeps me in the game longer. With this way of trading, I have more chances of catching a really great trend in the long run.
Unfortunately I will get whipsawed out of some good stocks many times. I see it like car insurance. You do not want to get in an accident just because you pay car insurance – but you still pay it just in case.
TSLA can certainly turn into a buy again. For people who just want to park their money, my model may not be for them. I trade quite a bit sometimes.
Learn more about the Trend Following model here.
