When to sell a stock (In the green)

[mrpaseo]

Let's say you purchase a stock at 15 dollars a share. What is your process to figuring out when to sell it?

This is a hypothetical and educational question as I have no experience in selling...well, anything. I have been investing since I was 23 (Currently 37) and have made only one sale (Mutual funds to dig myself out from a credit card).

My thoughts are this; there are a few ways to determine your sell.

1. A date: Meaning you intend to sell after X amount of days/weeks or as the market has identified dips and ups in the past.

2. A dollar amount: You pay 15 dollars a share and you put a limit in for 16.50 per share and let it ride.

3. A percentage: You decide that you are happy with a 10% profit on anything you purchase so you do the math and put your stop in for that amount.

Are there any other options I missed? What are your opinions on the above or what is your own method?

Thanks for your input,
Ray

[Broken Arrow]

Wow, talk about popping open a can of worms.

Well, as you have pointed out, there are actually several different ways to figure out your exit strategy.

I'm going to assume this is trading, because an investor almost always buy-and-hold, and about the only time you would sell is to adjust your portfolio relative to what's going on in your life, not what's going on in the market.

Some are technical traders, and will do what you have stated here. For example, day traders typically have arbitrary rules that govern when they get in and get out. One day trader whom I respect has a personal rule that he always sells after a day trade reaches $150 profit or when it loses $75 (per $1k). Again, such rules are personal.

Other technical traders resort to charts and specific patterns and indicators to make their sell. For example, according to chartists, there are certain reversal patterns that tend to show up frequently. A double valley or double peak, for example. 123 is another one. Patterns of consolidation is yet another.

Still others rely on fundamentals to gauge their sells. For example, they may look at quarterly earnings report, guidances, outlook, analyst reports, and 10Qs to get a sense of where the company is at and whether it appears to be a good idea to sell or not.

Personally, I'm a swing trader who uses fundamentals whenever possible, and then uses technicals to zero in on the buys and sells. Actually, for sells, I'm mostly just relying on trailing stops nowadays. When I feel that it's time to sell, I'll just set a trailing stop and forget it about it. If it goes through, it goes through. If it doesn't? Well, you're stilling making money.

Last thing I want to emphasize is that, while there is indeed such a thing as a "good" and "bad" trading strategy, once you get to a certain point, it's also a matter of personal preference and what work best for you. So, anyone who tells you they know exactly how everyone else should trade should be looked upon with great suspicion. That's like someone telling everybody else that we should all drive the exact speeds and take the exact same routes when we're going somewhere. I especially love it when they're also people who are attempting to sell you something, claiming that other people are making tons of money with their "secret system" (results may vary), but for a limited time offer, they are willing to share that secret system with you for only 3 easy payments of $99.99. Riiiight.

[mrpaseo]

Wow, talk about popping open a can of worms.

Well, as you have pointed out, there are actually several different ways to figure out your exit strategy.

I'm going to assume this is trading, because an investor almost always buy-and-hold, and about the only time you would sell is to adjust your portfolio relative to what's going on in your life, not what's going on in the market.

Your assumptions are correct, I put a few dollars into stocks over the past few months as a learning tool. This has nothing to do with my investments, just education and fun. I am not a "Day trader" per say, considering I have not sold any sense opening the account.

Some are technical traders, and will do what you have stated here. For example, day traders typically have arbitrary rules that govern when they get in and get out. One day trader whom I respect has a personal rule that he always sells after a day trade reaches $150 profit or when it loses $75 (per $1k). Again, such rules are personal.

Is there a program that can be used to calculate/track stock trading? Something that you could plug some numbers in and see the outcome to help make decisions? As of right now everything I do is on excel, since I have not sold it is fine but I am looking into selling some and would like to be able to make educated guesses

Other technical traders resort to charts and specific patterns and indicators to make their sell. For example, according to chartists, there are certain reversal patterns that tend to show up frequently. A double valley or double peak, for example. 123 is another one. Patterns of consolidation is yet another.

Yup, have no idea what your talking about here, but I understand there are different ways to decide. I do not have the time right now to track stocks closely (This I am not doing this as actual investments) but I would like to learn all I can now so when I do have time I will not be starting from ground zero.

Still others rely on fundamentals to gauge their sells. For example, they may look at quarterly earnings report, guidances, outlook, analyst reports, and 10Qs to get a sense of where the company is at and whether it appears to be a good idea to sell or not.

How does one learn all this?

Personally, I'm a swing trader who uses fundamentals whenever possible, and then uses technicals to zero in on the buys and sells. Actually, for sells, I'm mostly just relying on trailing stops nowadays. When I feel that it's time to sell, I'll just set a trailing stop and forget it about it. If it goes through, it goes through. If it doesn't? Well, you're stilling making money.

Trailing stops, I think this is how I intend to do it, I will decide on a sell price and put the stop order in, I believe it will stay active for 60 days until I get what I am lookinf for or it will just self cancel. Of course with research and a few WAGs I may just get what I am asking for too

Last thing I want to emphasize is that, while there is indeed such a thing as a "good" and "bad" trading strategy, once you get to a certain point, it's also a matter of personal preference and what work best for you. So, anyone who tells you they know exactly how everyone else should trade should be looked upon with great suspicion. That's like someone telling everybody else that we should all drive the exact speeds and take the exact same routes when we're going somewhere. I especially love it when they're also people who are attempting to sell you something, claiming that other people are making tons of money with their "secret system" (results may vary), but for a limited time offer, they are willing to share that secret system with you for only 3 easy payments of $99.99. Riiiight.

I agree that there really is no write/wrong way to do this, I am trying to learn all I can so I can make my own assesments and decide on my own.

Thank you very much for your help,


Ray

[Broken Arrow]

Mental note: Need to save the text in case I take too long and accidentally lose it.

Is there a program that can be used to calculate/track stock trading? Something that you could plug some numbers in and see the outcome to help make decisions? As of right now everything I do is on excel, since I have not sold it is fine but I am looking into selling some and would like to be able to make educated guesses

I'm sorry, but I currently don't know any decent ones that I can recommend. I am also still learning.

For now, I use Google's portfolio tracker, but Yahoo's is much more customizable. I am sticking with Google's because I like their format better, and am more "at home" with it. It sounds nutty to say that, but it makes quite a difference when you are wading through the charts and numbers, trying to make some sense of the market....

Both are free, and I recommend to give them both a try.

Scottrade also has a portfolio tracker (as I'm sure all major brokerages have a similar feature), but I don't use it because I don't want to be locked down into them in case I ever decide to move my money.

Yup, have no idea what your talking about here, but I understand there are different ways to decide. I do not have the time right now to track stocks closely (This I am not doing this as actual investments) but I would like to learn all I can now so when I do have time I will not be starting from ground zero.

I think the easiest way to learn here is to find a technical or day trader, buy him lunch, and have him sit down with you to go through some of the stuff.

If not, even a Dummy's book on technical analysis can be helpful to get you started with the basics.

How does one learn all this?

Fundamental analysis? Ben Graham's book, "The Intelligent Investor" is probably a good way to get your foundation in it. He's Warren Buffett's mentor back in the day. I don't know about others, but the book is rather heady to me.

Speaking of Warren Buffett, he's a good living example of a fundamental investor. I track him whenever the opportunity arises, and try to learn what I can from him.

A quick word of advice: Learn from Buffett, but don't invest like him. He gets calls all the time from companies offering sweet deals. So, when you hear him putting down billions in GS and GE for example, don't be fooled. He's getting special treatment with preferred stocks with high dividends. The rest of us peons can only buy common stocks. Apologies if you knew that already.

Last but not least, I want to put in a word about a little-known man named Harry Domash. From what I can tell, he's a fairly low-profile dividend investor, but he writes so objectively and is so knowledgeable about growth and dividend investing, it's hard to tell that about him. Despite the questionable title, his book "Fire your Stock Analyst" is one of the most practical and informative books on stock research I've seen yet.

Trailing stops, I think this is how I intend to do it, I will decide on a sell price and put the stop order in, I believe it will stay active for 60 days until I get what I am lookinf for or it will just self cancel. Of course with research and a few WAGs I may just get what I am asking for too

Yes, you can determine an arbitrary buy and sell price, and roll from there.

I'm a bit more general, depending on the situation as it unfolds.... For example, I usually wait until the upside looks attractive enough to buy into, regardless of the price. I also sell when I am no longer confident about my trade, regardless of the price.

I do use technicals to zero in on a near-specific buy and sell price, but ultimately, I try not to get hung up on the price itself. And besides, valuations is what's important, not price.

I'm not saying everyone should trade like me or anything. I'm just offering another trader's perspective on this.

Speaking of which, you'll want to be aware of the fact that there is no single perfect trading strategy for all occasions. The market does not stand still, especially nowadays, and neither should we. We need to remain versatile and be ready to drop a favored tactic that may have worked yesterday, but not today, and be ready to employ one that we may not have liked in the past, but may be much more applicable now.

Growth or Dividend strategy. Momentum or Contrarian. Technical or Fundamental. In the end, it doesn't matter to me. Whatever it takes to get the job done and make money. So, I use a little bit of everything....

Thank you very much for your help,

You are quite welcome sir! I can probably talk all day long about this topic, but in the end, I too am still learning myself. So, please take what I say here for what it's worth, and with a grain of salt. In the end, we all have to find what makes the most sense and works best for us.