|
  |
|
|
Figuring Out An Exit Strategy On A Stock
By Jobo Smith
When investing, whether trading or long term most people worry about the entry. Is the stock too high? Will it keep going lower? Will it be affected be the overall market conditions? These are all valid questions and do play an integral part in any investment or trade. The one thing almost no one takes into account is where and how do I exit a trade, whether is a day trade, swing trade (few days or weeks), or a long term investment (3 months to multi years). I would argue that the exit is more important than the entry. Sure if you screw up and buy at the wrong time (shorting also, but that is another topic) you can be assured of a loss. However, more often than not, people are pretty good at entry of stocks, assuming they are not chasing hype and have been patient with their method. The place they mess up is the exit. They have no rules. Once you start making money, greed can take over. "I don't want to sell too early, it might keep going," or "The last time I sold when I made xx amount, I could have made 10 times that much." Every entry, BEFORE even placed, should have an exit strategy. Exit strategies can include the following: 1. Trailing Stop - A price below the peak gain price where you will take profits if the stock reverses and starts to sell. 2. Scale Out - Take the investment and scale out at fixed percent gain intervals. For example, and a great one for investing, if you own stock and it rises 25% up, sell 1/4 of the position. Once it rises to 50% gain on the balance, sell 1/2 of what you have left. You have now locked in a 25% gain on your original purchase. The balance should be at most locked at break even (meaning if it starts to sell, never let it go to a loss). On the balance, if the stock takes off strongly after a 50% gain, look to sell the balance and move on. 3. Forever Investment - If you have an investment that you think is a super deal longer term and you are lucky enough to get a 100% gain on it, immediately sell 1/2. Why? Because once you sell 1/2, you have done a superb thing. You have retrieved your original investment out of it, all the money, and still have 50% working. Even better, no matter what, even if the company goes bankrupt, you cannot lose. Ever. Take that 50% you have out, and try to find 2 other ideas that might do the same. The one thing to keep in mind here is there are only very very few Walmart, Home Depot's, McDonalds etc. Even if you have locked in this part, be aware that tons of companies do superb for years, then the market changes and they bite the dust. It is super rare to find a new Proctor&Gamble or Microsoft. 4. Price Target - figure out from entry where you simply will just get out. For example you might purchase a stock at 12, but be very happy if it went to 15 in a month or 2. So that is your exit. Price targets are entirely dependent on expected hold time and should grow the longer you plan to hold the stock (within reason). The key to remember here is you have to take what the stock is capable of doing, not what you want the stock to do.
|
Stock day trading robot software
| Stock Trading Info
PLEASE VISIT THE CONTRIBUTOR'S WEBSITE
No reactions yet.
Please login or sign up to rate this intel.
Please login or sign up to add a comment.
The copyright for this content entitled "Figuring Out An Exit Strategy On A Stock" has been specified by the contributor as:
All Rights Reserved
This content may not be copied, distributed or adapted by anyone under any circumstances.
|
 |
May, 2012
2008
January, February, March, April, May, June, July, August, September, October, November, December
2009
January, February, March, April, May, June, July, August, September, October, November, December
2010
January, February, March, April, May, June, July, August, September, October, November, December
2011
January, February, March, April, May, June, July, August, September, October, November, December
2012
January, February, March, April, May
|
|
Not a member yet?
Qondio is a powerful network for making it online. If you have a website to
promote, we can help.
Sign up and get in on the action.
|
|
Welcome to Qondio! Discover the awesome power this network can deliver by going to our About page. Or you could skip straight to the Sign Up form.
|
|
