Selling at the right time

[kolonel]

As I pour over countless threads, I read when people sell their stock that would appear to be premature.

I can understand that some set targets, but isn't this what a trailing stop is for?

Or could it be a case that their new stop was too tight?

Regards
kolonel

 

[theasxgorilla]

As is often the case, the answer is, it depends.

Imagine you had a system that you knew could win, under particular market conditions, 2 times every 5 trades. And imagine that you knew that on those two trades you had to win 2% (so you set a profit target), and on the three losing trades your initial stop would get you out at a 1% loss. Given enough trades...you would win, right?

In a system that uses trailing stops, if volatility increases and your stop can't adjust to that, which ratcheted stops can't (trailing stops that only move up), then it can happen that you are stopped out of your position, yet the trend continued. That sucks...but it's to be expected. You'll never a find a system/method which works for all conditions.

ASX.G

 

[nomore4s]

I don't think you'll ever be entirely happy with your exits.

You'll either give up some open profit or get out too early and miss some of the run. Very rarely will you time the trade exactly right imo.

 

[prawn_86]

I would say that a defined timeframe is important when answering this question.

Short to mid term traders tend to 'trend follow' and are happy catching some of the wave, and know that they are rarely ever going to catch the whole movement, thats just a given.

Longer term fundamental investors, should theoretically evaluate every peice of news and then re-adjust their valuations to reflect this news.

Personally if a price reaches my own valuation, i will sell if i think it is getting overpriced. This is not to say that the stock wont keep going up, due to sentiment, but if i feel its overprice, im out.

I think it is a matter of being happy with your exits, and not really worrying what happens after, until you are looking to enter again.

 

[tech/a]

Short term trading methods base their expectancy on more wins than losses.
Longterm methods base their expectancy on much larger wins than aggregate losses.
Medium term methods base their expectancy on a combination of both.

Application of exits whatever it is you choose as an exit should be in accordance with your KNOWN expectancy.
If you dont know it then you need to define it by testing or actual trade performance records.

 

[IFocus]

Hi kolonel

A few questions to follow on from Techs post that may help

1. What time frame are you looking to trade?
2. Is your method chosen compatible to your time frame?
3. The most important is what is the current market time frame? are the 2
above compatible.
4. Before entering a position whats the risk reward of the trade?

To answer 4 you must have a target! Thats a possible exit!

 

[tech/a]

4. Before entering a position whats the risk reward of the trade?

A very important point.
If you trade with ONLY R/R in mind then profit will come.

As ASX has put it

Imagine you had a system that you knew could win, under particular market conditions, 2 times every 5 trades. And imagine that you knew that on those two trades you had to win 2% (so you set a profit target), and on the three losing trades your initial stop would get you out at a 1% loss. Given enough trades...you would win, right?

From here then its only trade frequency and win Positive expectancy to risk which will determine how much PROFIT you'll return in the long run.

See you have trade expectancy AND method expectancy---both will be different when you add trade frequency into the mix.

Of course if the method over time is negative then----