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Registered User
Joined: 7/26/2005
Posts: 109
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I have a stock (wire) up 12% I know that I can sell and take my profits now but I feel like the stock has more up side. But then I always think that way and I watch the stock go right back down. How can I protect these profits.
Thanks
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Registered User
Joined: 3/15/2006
Posts: 8
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With no pun intended, a profit is more difficult to take than a loss. Loss-cutting tactics are always uncomplicated and subject to cut-and-dried rules that truncate your loss according to a prearranged plan.
On the other hand, determining whether to take a profit or let it run can be a difficult judgment decision to make on the spot. Most people find their judgment impaired at the point of decision. This is simply because they are under pressure and their emotions take control.
A mechanical system can help you get around this. Most systems for taking profits fit into one of two categories. (1) Take your profit because youve attained a preplanned gain - such as 20 percent, or maybe 50 percent. (2) A trailing loss cut, which is moved up as the stock advances. For example, some investors move their loss-cut points up gradually according to a rising trendline, or in sync with a moving average. One method is to use the lows of minor dips as they form in successively higher steps. One thing all trailing loss-cut methods have in common is that you are taken out on a downside violation of the current loss-cut level. Which means that you always sell on weakness, which is a bigger disadvantage than you might guess if youve never tried it. A big advantage, though, is that a strong stock can climb to the moon without faltering enough to shake you out. Which means that your profit can run and run and run. All the way to the moon.
Profit taking systems tend to become at least a little complicated. Lets say you decide to sell whenever you get a 20 percent profit. A stock advances 15 percent and then turns around and heads south. How much of your profit do you give back before getting out. One way is to combine category one and category two. You could use a trailing loss cut and sell when your profit is 20 percent or when the loss cut is violated - whichever comes first.
The important thing about system selling (or exiting in general, that is) is that all the decisions have to be made in advance. You dont create a battle plan in the middle of the battle. When you take a position, you should already know exactly what you would do under any circumstance that could develop.
this is a copy what i found in the worden archives
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Registered User
Joined: 3/15/2006
Posts: 8
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There is one about Time stop too that could be used you take a look over there in the archives
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Registered User
Joined: 12/8/2004
Posts: 1,301
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The best way to learn when to take profits is to learn elliott wave analysis. Your stock just completed wave 3 on a weekly chart. Your stock will correct to 19-26.00 before having a chance to move to higher highs.
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Registered User
Joined: 1/28/2005
Posts: 6,049
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wjdowney
There is no simple solution to your problem. Every time we "sell" a profit we "risk" missing a move. The only way to satisfy all conditions is to consider rebuying the stock if you are stopped out.
If you have 12% profit I would place a stop 6% under the price. If the stock moves up I would raise it to half the profit level. 18% profit move stop to 9%--22% profit move stop to 11% and so on. At some point if the stock moves up enough you may want to tighten the stop.
Should the stock immediately get stopped out. You would have a 6% profit and you could place a buy order just above recent highs. This way you will reenter the position should the stop take off again.
Hope that helps
Good Luck
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Registered User
Joined: 10/24/2005
Posts: 101
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One way I've taken profit is to figure out what the rally will go to before turning around. If there is a resistance level, I will take profit when the stock hit rally to just beneath that resistance. Chances are, the stock will dip. You can always rebuy on the dip.
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Registered User
Joined: 12/9/2004
Posts: 14
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Here is a very simple strategy...it is not mine and I have seen it in print in a variety of publications. Set an initial profit target when you enter the trade. This profit target can be an recent high in the stock price or it could be a positive move equal to the amount risked on the initial stop loss. For instance, if I risk 1 point on the trade, as soon as the trade moves up one point, I take profits on half of the position. Then I would move my stop on the remaining shares to break-even and continue to trail my stop on the rest of the postition as the trade progressed.
Since you mentioned WINE, I'll use it as an example. Say I would buy the pullback to the 50DEMA on 3/17/2006. I would set my initial protective stop at the bar low of my entry day (in this case, around 29.60). I would set my initial profit target just below the old trend high (around 36.00)--this is the point I intend to sell half of my position and carry a break-even stop on my remaining shares. As the trade develops, you can trail you stop to protect profits. In reality, I would begin looking to trail my stop earlier in the trade for a move this size. If I had taken the trade on 3/17/2006, today I would have a stop on half of my shares at break-even (around 30.10) and a stop to protect open profits on the remainder of my position (in this case pretty much right at 32.00--I used a linear regression line on a the consolidation area, but this is pretty arbitrary IMO).
I almost always am stopped out of my positions even when it is for a profit.
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Registered User
Joined: 12/30/2004
Posts: 10
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dear havenocent ,
could you elaborate on elliot waves analysis and price projections ?
numetor
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Registered User
Joined: 10/7/2004
Posts: 16
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A stock always has the potential of rising further but if you worry about catching it at the top, you will end up losing a lot more than you gain. If you notice the stock is beginning to hestitate, there is nothing wrong with taking your profit. In you realy aren't sure, you could take your profit and immediately buy back your position. That "insurance" will cost you about $14 ($7 twice). It may sound dumb but if the stock reverses, you could lose a lot more than $14 real quick. Cheap insurance.
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 Gold Customer
Joined: 11/25/2004
Posts: 79
Location: Illinois
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If a stock is sold for a gain (to eliminate any chance of losing that gain) and then repurchased at the same price, wouldn't the amount at risk be exactly the same as before? Also a taxable event has just been created (and a new starting point for what could have been a "long term" gain).
It seems to me that the only good reason to sell would be that I anticipate a substantial drop. If it does drop, by repurchasing at a lower price, I would then be locking in the previous gain.
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Registered User
Joined: 10/24/2005
Posts: 101
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rtdip,
I think the idea is that if you see hesitation and you have no idea what the stock's next move is, its better to take your money and stand aside.
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Registered User
Joined: 12/19/2004
Posts: 457
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This is always difficult.
Stock prices, as opposed to other markets, are much more noisy. Longer time in market is equivalent to more risk, so if you can book a profit, it is usually wise to do so.
What I like to do is trade against a long position. If I have a long position that is profitable, and I want to hold it, perhaps build a bigger one on pullbacks, then it is possible to buy some puts on the stock to lock in some gains, and sell them when it hits a point I think is support. Search the forum for my threads on NEM for an example.
Should the stock continue to take off, you will still participate. Should it decline massively, you are protected.
The catch--should it move sideways, then you lose out on the money you spent for the put.
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Registered User
Joined: 3/7/2005
Posts: 148
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I AM NOT MUCH FOR WAVES UNLESS I AM IN CANCUN
TAKE SOME OFF THE TABLE,PERHAPS 50%
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