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A profitable selling option/technique

Trading course this Saturday

Last newsletter I talked about not self sabotaging and holding strong to let trades run to fruition. One of the hardest things in trading is letting profits run, particularly a trade that is going up at a rate of knots. The temptation to sell early can be overwhelming. However there are techiques to help overcome the challenge. The trade on gold stock NST is an example.

 NST signalled a 52 week high back in mid Febuary, after going sideways a while patience was rewarded and the stock rallied. Now I am always saying that the trend is your friend and trades should be held until the exit is signalled, however I realise we live and trade with human emotion and people are different in their needs. When a stock is making a good quick gain,  holding on can be too emotionally dificult for some, so there are strategies that can be used to help the trader, and the bank account.

 One of my clients (Tim) uses a 50% rule. If a stock climbs by 50% or more, he starts to tighten his exit. Tightening an exit means not selling immediately but using a quicker exit , so as not to give back too much of the percentage gain realised if the stock continues to fall. You can see in the chart above the moving averages have not crossed to show a sell signal but Tim was out on Monday morning, because "his" exit was signalled. An exit only used if he has a good profit.  No method is perfect, no matter what entry, position sizing (risk) or exit you use (be that 50% or something else) there will always be give and take elsewhere. As I have said many times it comes back to what suits you.

Tims decision to use the profit exit that I suggested, came about from us discussing his objectives and trading preferences and looking at what the advantages and disadvantages there were in employing that extra exit rule.  This time it worked perfectly, sometimes it does not, NST could turn around and rally back up, and a re entry will need to be decided upon.

Decisions. Trading is about making decisions and going with those decisions. Accepting and sticking to it. Using this method above frees up capital to employ into other opportunities, which there are certainly many at the moment with this very strong market. The extra rule also reduces volatility in the portfolio, another preference Tim liked.

Speaking of decisions I have a few (4) seats left for Saturdays course, are you still thinking about coming? for more details click on the link below.

http://www.easysharetradingsystems.com.au/Trading-Course/

Also Peters Portfolio has a few changes. I bought and sold some shares this week making some small changes. Its going well, now up almost 15% since being fully loaded 6 months ago. The link is below.

http://www.easysharetradingsystems.com.au/peters-portfolio.html

“Whenever you see a successful business, someone once made a courageous decision.”
― Peter F. Drucker 

 Good luck with the trading, until next time

Peter

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