{"id":499,"date":"2005-07-15T19:01:07","date_gmt":"2005-07-16T00:01:07","guid":{"rendered":"http:\/\/selfinvestors.com\/tradingstocks\/mail-bag\/the-most-difficult-part-of-trading-when-to-sell-your-stock\/"},"modified":"2007-01-07T19:28:10","modified_gmt":"2007-01-08T00:28:10","slug":"the-most-difficult-part-of-trading-when-to-sell-your-stock","status":"publish","type":"post","link":"https:\/\/selfinvestors.com\/tradingstocks\/mail-bag\/the-most-difficult-part-of-trading-when-to-sell-your-stock\/","title":{"rendered":"A Discussion Of The Most Difficult Part of Trading – When to Sell Your Stock"},"content":{"rendered":"

Question<\/strong>:<\/p>\n

I am struggling a bit with my profit taking sell rules.  I do pretty
\nwell selling positions that aren’t working to keep my losses small.
\nHowever, I have trouble holding on to my winners.  I either sell to
\nearly wanting to bank that profit (especially after a few losses in a
\nrow) or watch a winner turn into a breakeven or small loser (I try to
\nlimit my winners from becoming big losers).  I am trying to do the
\nO’Neil 3 to 1 thing but find many of my purchases never quite make it to
\nthe ~20% level before they correct. <\/p>\n

Do you have specific sell rules? <\/p>\n

Any ideas in this area would be much appreciated.<\/p>\n

My Response<\/strong>:<\/p>\n

It’s a good question – selling to take a profit is the most difficult part
\nof investing because there are so many if’s, and or buts.<\/p>\n

Honestly, I don’t have specific sell rules but do follow certain guidelines
\nyou’ll want to consider:<\/p>\n

1. I almost always sell before an earnings announcement<\/p>\n

2. Typically, you’ll want to lock in profits around 20 – 25% in a strong
\nmarket, but towards the end of a bull run or in an iffy market, consider
\ntaking profits at 15%.  So instead  of a (20% – 25% to 7%-8% ratio) use a
\n(15% to 5% ratio).  If you look at my model portfolio, you’ll notice that
\nthe average gain is around 15.5% and the average loss around 5.5%.  Maybe
\nconsider taking profits at 15% while keeping losses small.  You can be right
\nless than half the time and still do very well.<\/p>\n

3.  Did the the stock break out with force and run up quickly then
\nconsolidate quietly?  Is it still exhibiting good price and volume action
\n(heavy buying, light volume selling).  If so, this could be a big winner for
\nyou and you may want to hold out for profits more than 20 – 25% in a
\nstrong bull market.<\/p>\n

4. Look for a change in trend of price and volume as a signal to lock in
\ngains.  A good example is CBG, a current Model P. holding.   Beginning July
\n5th, buy volume began to subside as it edged higher.  Of course in hindsight
\nI should have locked in that 20% profit right then and there.  At the time I
\nwas thinking that post holiday trade was skewing the volume a bit and high
\nvolume selling hadn’t yet appeared.  Now that they have appeared I am
\nlooking for an exit point, preferably around 45, if it can get that far.  I
\nstill have a decent chance of locking in 15% profits before earnings.<\/p>\n

5. Don’t forget to pay attention to upward trend lines as well as prior
\nresistance points as well.  They can provide good predeterminded sell
\npoints.  A good example of this is DCAI, another current holding in the M.P.
\nThis is a stock that has carved out a deep base, with resistance at the high
\nin the left side around 35.  Would I continue holding if it hits that high?
\nNo, I’m taking very nice profits off the table.  Deep bases have a much
\nhigher failure rate, so it’s unlikely that DCAI gets to 35, carves a nice
\nhandle and shoots to the moon. I’m just looking for a nice run in the right
\nside and unloading.<\/p>\n

Selling is somewhat of an art form and you will never be perfect.  If you
\ncan keep losses small and maybe move your profit target closer in a bit, you
\nwill be successful.<\/p>\n

I have certainly had my share of blunders.  In 2003, I took a quick 50% gain
\nin TASR, that cost me 10’s of thousands in the long run.  At the beginning
\nof this year, I let large gains in DHB, XXIA and TASR slip away in the Model
\nPortfolio and have been chipping away all year to recover those losses.  It
\nis important to track your trades and learn from mistakes.  Be flexible and
\nadjust.<\/p>\n

I think you’re on the right track, just a few minor adjustments.<\/p>\n

Member Response<\/strong>:<\/p>\n

Thanks.  I agree selling is the most difficult but probably the most
\nimportant as well.  I have tried to adhere to the 3 to 1 mantra but most
\nof my stocks purchased have corrected before they hit the 20% range and
\nthen I hold on too long for either a small loss or gain.  I have more
\nrecently been willing to take 12 – 15% gains but then feel my stops
\nbecome a little too tight and get stopped out of good trades.<\/p>\n

I have since widen my stops a bit but try to keep losses to 4 – 5% and
\nthen take 10 – 15% gains, especially in a less than raging bull.  <\/p>\n

Do you see value in a 1st level profit target where you would sell 75%
\nof your position and a 2nd profit target to sell the remaining 25%?  I
\nhave always talked myself out of this type of selling but know
\nevaluating the merits again.  What are your thoughts?<\/p>\n

My Response<\/strong>:<\/p>\n

If you’re buying at the correct time, cutting your losses at 5% should keep
\nyou in the majority of trades, provided you have good entry points.  Maybe
\ntake a look at your entry points and the quality of the base?  I’d be happy
\nto take a look at a few if you’d like.<\/p>\n

I do see some value in taking partial profits depending on the situation,
\nbut I’m more of an all or nothing trader.  This keeps the number of
\npositions to a minimum and keeps commission costs lower.  It really depends
\non the company.  I think that the solid, established companies like an
\nApple, Starbux, Google ,etc this method can be a good one for locking in
\nprofits ahead of earnings.  For example, I will most likely take 50% profit
\non Google before earnings are released (on the 21st) and let the other half
\nride.  If the stock drops to support maybe I add back that other half.  If
\nthe stock soars on the earnings, you still gain on the other half.  However,
\nwith more volatile, unestablished companies, the best option is to usually
\nsell ALL before an earnings report.<\/p>\n

Generally speaking, I think it’s best to avoid getting too cute with
\nselling.  If you have the solid 20% gain, take it… ALL of it.  Just
\nremember the signs of what to look for with the potential big winners, which
\nmight provide larger gains.<\/p>\n","protected":false},"excerpt":{"rendered":"

Question: I am struggling a bit with my profit taking sell rules.  I do pretty well selling positions that aren’t working to keep my losses small. However, I have trouble holding on to my winners.  I either sell to early wanting to bank that profit (especially after a few losses in a row) or watch … Continue reading A Discussion Of The Most Difficult Part of Trading – When to Sell Your Stock<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19],"tags":[],"class_list":["post-499","post","type-post","status-publish","format-standard","hentry","category-mail-bag"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/posts\/499","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/comments?post=499"}],"version-history":[{"count":0,"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/posts\/499\/revisions"}],"wp:attachment":[{"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/media?parent=499"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/categories?post=499"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/selfinvestors.com\/tradingstocks\/wp-json\/wp\/v2\/tags?post=499"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}