Rules On When To Sell And Take Profit

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Nov 04 2006
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Remember this mantra for selling :

“Bulls make money and bears make money, but pigs get slaughtered.”

Sell early to lock in gains. It’s better to leave money on the table than to get out late.

When a stock goes up 20% or more in the first three weeks after a breakout, you should hold it for at least eight weeks. Such stocks often go on to become the market’s biggest winners.

Many stocks aren’t quite so powerful. They may climb 20% to 25% in the span of a few weeks or months, then stall. They may also form a base, dipping into a fresh correction. Be ready to take profits when such stocks flash sell signals. Not every stock needs to be a home run.

Some other key sell rules :
  • Be wary of big price declines in heavy trade. That’s a sign that big-money investors are dumping shares. Sharp drops through key support levels like the 50-day moving average also suggest institutional selling.
  • Watch out for climax tops. A climax top occurs when a stock that’s already had a huge run-up suddenly races higher and faster than it ever has before. Wide price swings, exhaustion gaps and sharp reversals typify the action of a climax run, indicating the stock’s likely overheating and headed for a fall.
  • New highs on low volume are a bad sign. Sell when a stock hits new highs on low volume.

Happy Trading.

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