When to sell shares?

[Fleeta]

I've been doing an analysis of SP movements after I sell a stock and have come up with some very inconclusive evidence. I know Tech/a likes to say 'let the profits ride' but as far as my transactions go, it hasn't always been the case.

The analysis began after I sold my VSL shares on 4/10 for $1.54 and within a month they are now $1.77. Very annoying! Should have let the profits ride.

My worst case of not letting profits ride was selling FKP after it doubled in a year for $2.88 in March 04. The current share price is $4.62. Other examples are BIL (sold at $6.07, now $8.33) and SMS (sold at $12.15, now $16.70).

However, many of the stocks that I sold that had doubled in a short period (i.e. less than a year), did not continue on such a run. I sold TEN for $4.13 in Nov 04 and is now $3.38. I also sold VWD for $1.43 in Sept 03 after it doubled in a year and is now $1.40.

Some of the stocks that I sold after they tanked have since recovered. In particular CRG (bought at 10.33, sold at 9.80, now 10.32) and HOM (bought at 65c, sold at 33c, now 44c).

I guess I can take comfort in the fact that my actual portfolio has outperformed this post-sale portfolio, but i'm still struggling with exit points and how much do you 'let profits ride'. Anyone got some examples of set exit points?

 

[krisbarry]

A simple answer may be just to take pot-luck and let 50% of your trades run, and the others exit the trade. That way you can cover both bases.

The trick is which ones to let run and which ones to exit.

 

[tech/a]

This is where profit is made at the sell side of a transaction.
As You point out Fleeta it can be a 2 sided sword---to early sometimes and too late at others.

The constant challenge for traders is to let profits run yet allowing room for a buy to continue during the pullback phases.
This is why testing and recording your results is very important.
You'll never get it perfectly correct.But what you will find is YOUR method of holding for profit and releasing to deminish lost profit in sustained pullbacks.

Kris's idea may well be valid with his entry and exit stratagy.
Mine is a 180 day EMA of the low in one system.Simple but effecive.
Even then I exited CTX at 180% profit only to watch it go to 600%.

The end result is consistance of return over time.More larger wins and less losses both in time and $$value.

One way I've not tried but really believe would be the ultimate is to pick a point of profit say 100%(Could be any amount but over 100% seems best from my work) sell the initial outlay and then let the profit run indefinately.If you take another trade in the same stock then do it again.(Treating that trade as a seperate entity until it is stopped exited or compounded with another X% profit)---that way the stock would have to be delisted to lose everything ---your profits are un restricted.

To protect in bear markets have a complete portfolio exit mechanism based upon your portfolio performance and/or Index performance.Buy back the portfolio at the going rate once signalled to return to the market.

 

[happytrader]

Hi there Fleeta

Had a look at your vsl exit date and I thought that was perfect timing. Remember you are only looking back in hindsight. You had no idea at that time how far it was going to continue so in actual fact you locked in profit, saved yourself loss, uncertainty, and time. By doing this you can think of it as playing for better position later in the stock. There is absolutely no reason why you could not have bought back into vsl or any of the stocks you mentioned. Another strategy is to take in half. Who says you have to sell the lot.

Cheers
Happytrader

 

[tech/a]

Who says you have to sell the lot.

Yes true.
But you have to have a clear reason to make a decision.
To just say sell at 50% or sell at 100% sell half or 70% or whatever is without testing-----just a guess.

Doing this may alter a great long term method of holding till an exit is triggered to a method which is nett negative.

I'm trying to stress here that having an idea that something is a great idea and actually putting it into practice are/can be very distinctly different.

 

[happytrader]

Yes true.
But you have to have a clear reason to make a decision.
To just say sell at 50% or sell at 100% sell half or 70% or whatever is without testing-----just a guess.

Doing this may alter a great long term method of holding till an exit is triggered to a method which is nett negative.

I'm trying to stress here that having an idea that something is a great idea and actually putting it into practice are/can be very distinctly different.

Hi Tech

Absolutely agree with your comments. My comments are made to encourage flexibility, creative and big picture thinking. There is always more than one way to skin a cat. (I love cats by the way).

Cheers
Happytrader

 

[michael_selway]

Hi best thing is sell half if it doubles or more (if u suspect stock is soon to run out of gas)

Then use that money to buy another good stock (eg when there is a good correction eg like now!)

If the fall is a longer term thing, eg Sep11, SARS, just hold the money u made on the sale, earn interest and wait!

What do u think?

Thanks

MS

 

[It's Snake Pliskin]

Everybody will have their own opinion on when to sell. The challenge is maximising profits and protecting capital at the same time. How is this done when your chosen stock drops and you have a stop that is too tight, or a loose stop that isn't hit but the share price languishes at it's new lows and then trends sideways or starts a slow bearish trend.

A challenge for us all I think.

Would anybody let a stock drop 30% before they sold out? There is ample room here for a price reversal, be it long or short term.
At the same time would you like to benefit a 3% loss of total capital? This can be done by positioning only 10% of trading funds on any given stock, and once again ample room to take advantage of a price reversal without selling at the bottom.
Position sizing is, apparently, the major factor in trading and does affect your loss taking or the minimisation of it.
So without dollar cost averaging based on price, and with correct position sizing and stop loss setting you can ride out the volatility - providing the fundamentals back up your analysis - and let profits run.

These are some points I have picked up in "5 minute investing", which can be found on the Investopedia site, or go to the trading strategies forum on ASF to pick up the link.

 

[It's Snake Pliskin]

Hi tech,

One way I've not tried but really believe would be the ultimate is to pick a point of profit say 100%(Could be any amount but over 100% seems best from my work) sell the initial outlay and then let the profit run indefinately.If you take another trade in the same stock then do it again.(Treating that trade as a seperate entity until it is stopped exited or compounded with another X% profit)---that way the stock would have to be delisted to lose everything ---your profits are un restricted.

Why sell your compounding power if the stock is still making profit? Where do you put the original purchase capital, considering compounding is why we invest?
This seems good for protecting capital, but minimises compounding unless it is employed to another growing stock. It may be good for the purposes of position sizing, balancing portfolios also.

If one is aware of the market mood and respects some basic fundamentals there is no need to do this. The accounting would be more complicated too.

 

[son of baglimit]

my only words of wisdom fleeta are : HOLD ONTO NVC - AS TODAY HAS SHOWED, IT JUST KEEPS FINDING - THIS IS GONNA BE A LONG FUN RIDE.
and whatya doin with ya $25 ?

 

[tech/a]

Hi tech,


Why sell your compounding power if the stock is still making profit? Where do you put the original purchase capital, considering compounding is why we invest?
This seems good for protecting capital, but minimises compounding unless it is employed to another growing stock. It may be good for the purposes of position sizing, balancing portfolios also.

If one is aware of the market mood and respects some basic fundamentals there is no need to do this. The accounting would be more complicated too.

The initial capital is immediately placed in another prospect.
In times of solid growth this would see many being added to the "Stable".
The longer you hold a prospect before moving it into the stable the less the impact on the leverage once the initial capital is removed.

Anyway its just an idea Ive been thinking about for when I'm old and greyer.

 

[happytrader]

Here something to think about

I am an option trader which means my time frame from entry to to exit is much shorter because time decay is the most important consideration. Picking direction is not the problem. Taking the odd loss is not the problem. To my disgust my archilles heal is not taking the money when it is offered!

Cheers
Happytrader

 

[Fleeta]

my only words of wisdom fleeta are : HOLD ONTO NVC - AS TODAY HAS SHOWED, IT JUST KEEPS FINDING - THIS IS GONNA BE A LONG FUN RIDE.
and whatya doin with ya $25 ?

LOVE YA WORK BAGLIMIT! NVC HAD A GREAT COUPLE OF DAYS, I'M GONNA WIN IT IN NOVEMBER TOO!!!!!

$25 is brokerage on the next big thing as predicted by you...c'mon, cough it up, I know you've got more!

 

[son of baglimit]

u r kidding aint ya - i think it was only weeks ago u were telling me u only had a small budget for my 'dodgy tips' - had no more to spare, and NOW YOU WANT MORE.

I WANNA SEE BEGGING - LOTS OF BEGGING - CMON EMBARRASS YASELF.