Are you selling your stocks at the right time?

[al_sellatmarket 10]

Are you selling your stocks at the right time?

 

Limiting your losses and protecting your gains is the most important rule for every investor. Unfortunately, with the high volatility of today's stock markets, making an efficient decision on selling your investment is riskier and consumes more time than ever. Statistics show that most intuitive, individual investors lose this game sooner or later.

 

When it comes to the stock market, there is no place for emotions or intuition. Believing otherwise has led many amateur investors straight to bankruptcy. If you want to become a successful investor, you must exclude emotions from your trading, and spend some time on choosing a trading strategy that is right for you.

 

How would you limit the losses? It is all about selling at the right moment. A successful investor never puts emotions into trading, and sells as his sell strategy suggests. Ask yourself: what is my exit strategy? If you don't have a sell strategy, you don't have any trading strategy at all!

 

There are many trading strategies available, all having their pros and cons. Most require you to monitor your stocks very closely. If you don't have much time to spare to watch your investment, a strategy based on the Trailing Stop method may be right for you.

 

The Trailing Stop method has strong benefits over alternative trading strategies. A Trailing Stop limits your losses but not your gains, while not requiring you to constantly monitor the market to achieve best results.

 

It does not perform miracles, but uses proven, published mathematical methods to maximize your gains and minimize losses. Speaking broadly, the Trailing Stop method has to deal with just two things: the current stock price, and the stop selling price that represents the moment at which to sell your shares.

 

Without going much further into the complex mathematics, the Trailing Stop method raises your stop selling price when the stock goes up, but holds it when the stock goes down. If the stock falls enough to reach the stop selling price, a strategy based on the Trailing Stop method produces a recommendation to sell immediately. This strategy effectively limits your loss to a pre-defined percentage of your investment, while at the same time not limiting your potential profit.

 

A modified version of this strategy based on the Adaptive Trailing Stop takes an additional parameter into account. The Adaptive Trailing Stop method ties its selling recommendations to stock volatility, which represents how fast the particular stock can rise or fall. Volatility is arguably the most important factor when it comes to the decision to sell, as it is closely tied with the stock's risk factor. This method works best for modern stock markets, as today's stocks can start moving very fast.

 

 

Developing and following the right strategy can be a difficult and time-consuming process that does require certain skills in higher mathematics. If you don't have that much time to spare, try using automated solutions that do all the monitoring and calculations for you, and give you selling recommendations in plain English.

 

This can be easily done with Wealthlab or Metastock scripts but if you have no experience in programming, than it will be a problem.

 

Frankly speaking, there is such an online service that uses the Adaptive Trailing Stop method as the sell strategy. It tracks and analyzes stock quotes daily on all major exchanges, including AMEX, NASDAQ, and NYSE, and re-evaluates the profit to risk ratio according to the chosen risk strategy. If a stock being monitored matches certain criteria, the system emails you a recommendation to sell.

 

The service is an implementation of the 'cut down you losses and let your profits grow' rule. Adaptive (volatility) trailing stop for individual investors.

 

There is nothing that even the best strategy can do to protect investments if an investor is not following its recommendations. The service helps you protect your investments by excluding emotions from trading. Just check your email daily and follow the system's recommendations to maximize your gains and minimize losses.

[torero 10]

I understand your strategy focus alot of exits, but aren't you even concerned about entries? Can't have one without the other if a trader wants to keep their strategies in positive expectancy.

[al_sellatmarket 10]

I understand your strategy focus alot of exits, but aren't you even concerned about entries? Can't have one without the other if a trader wants to keep their strategies in positive expectancy.

 

Well, I do not focus entries intentionally. Everyone is focused on entries and live exits to his\her intuition, emotions etc. It is a rare situation when a non-professional (the sevice adresses mostly them) trader has a precise exit strategy and follows it. Exit is much more important than entry since it is exit that creates profit or loss.

 

By my research, trailing stop shows positive result even if you enter RANDOMLY. Statistically, of course. I would say that entries do not play that big role, that exits do.

[brownsfan019 17]

Well, I do not focus entries intentionally. Everyone is focused on entries and live exits to his\her intuition, emotions etc. It is a rare situation when a non-professional (the sevice adresses mostly them) trader has a precise exit strategy and follows it. Exit is much more important than entry since it is exit that creates profit or loss.

 

By my research, trailing stop shows positive result even if you enter RANDOMLY. Statistically, of course. I would say that entries do not play that big role, that exits do.

 

Al - perhaps the theory sounds great of entries being irrelevant, but the practical use of that is marginal at best. Don't take my word for it, test it and trade it live and let us know how it goes.

[al_sellatmarket 10]

Al - perhaps the theory sounds great of entries being irrelevant, but the practical use of that is marginal at best. Don't take my word for it, test it and trade it live and let us know how it goes.

 

Entries are important of course! I do not say one should buy randomly to make profit. My point is that volatility trailing stop works even if you buy randomly.

 

Of course, a good trading strategy consists of a good entry strategy and a good exit strategy. But many non-professional traders frequently set stress on a good entry, but choose a bad or no exit one.

[torero 10]

I agree exits are a bit more difficult to guage when to get out. Position management probably takes more discretionary than many would like. I for one, have to change at times according to market conditions, which has good and bad results. But a fix exit sometimes can be a hindrance as well.