By Tom Gentile, Editor, Patterns & Profits
As you probably know, this week, we began transitioning to the new Gulfport Analytics.
And when that transition is complete, we’re going to be completely independent.
It’s been a tough year to say the least. The publishing rights for my research have changed hands three different times in the last 12 months, and I’ve been forbidden from offering subscribers things they’ve wanted for years…Things like direct access to my scans, tools, software, and apps… faster delivery on trade recommendations… better prices… more value… and even fewer marketing emails.
I can’t tell you how excited I am to be able to share ALL of my best research – without a publisher in the way. If you missed the video I published Tuesday outlining the changes that are coming, you can watch it right here.
Today, as we start to wind down 2024, I’m reflecting on my open positions while preparing for fresh opportunities in 2025.
This year has been strong for our alerts, but I’m always looking to improve both our success rate and ROI whenever I can.
And one of the best ways to improve your trading is to study your losing trades to gain insights into why a particular trade didn’t work out, and how you might avoid similar losses in the future.
A recent recommendation in Halliburton Co. (NYSE: HAL) provides a valuable teaching moment…
Q&A and Lessons Learned
Q: Do you follow a specific stop-loss rule for your trade alerts?
A: Great question! I firmly believe it’s okay to be wrong on a trade—what’s not okay is staying wrong.
Being a rules based trader, my approach here is simple: Set a predetermined stop-loss percentage, say 30% or 50%.If the trade hits that level, it’s time to exit.
It’s pretty much as simple as that.
In 2025, we’ll talk about a concept called “Cost as Risk.” This method allows you to define a percentage risk for your portfolio and size positions accordingly. This way, even a 100% loss on one trade would only affect your portfolio by the set percentage.
You’ll be hearing a lot more about “Cost as Risk” in the New Year, so stay tuned!
Q: The HAL option trade stopped out recently. Does that mean you’re also exiting the stock trade?
A: This is an excellent question, as it highlights the importance of managing each trade type separately.
Here’s what happened: I issued alerts for both a stock trade and an option trade on HAL based on a 90% pattern from my Money Calendar…
As you can see, HAL stock has gone up between December 2 and January 24 90% of the time for the last 10 years.
In Stock Cycles Trader, we purchased shares at $32.01, hoping to catch that 8.5% average return – and possibly do even better thanks to President-elect Trump’s promise to “Drill, Baby, Drill.”
In Timed Trader Pro, where I trade options on these Money Calendar signals, I recommended the HAL February 21, 2025, $30 Call which was filled at $2.75.
That option trade was designed to deliver 100% gains by the end of the pattern.
The option hit a 50% stop-loss on December 6, so I followed my discipline and closed the position.
However, the stock was only down about 8% at the time—not enough to warrant closing, as I typically consider stopping out of stock trades when losses approach 10%.
When managing both stock and options trades, treat them as separate entities.
Follow the stop-loss rules specific to each: The option trade was stopped out at a 50% loss. The stock trade remains open, as its loss hasn’t hit the 10% threshold.
This case highlights the difference in percentage moves between stocks and their corresponding options – but the important thing to note is that options can be a double-edged sword.
Sure, they can amplify your gains, but the leverage can also work against you quickly, even with a small decline in the stock.
That’s all for this week!
Good Trading,
Tom Gentile
America’s Pattern Trader
