Sunday, May 13, 2018: Holding and Selling Strategies When Investing in Stocks







The Obvious Holding Strategy

This morning we’re going to discuss holding and selling strategies when it comes to stocks.

It’s pretty obvious that if you are profiting at say, 20 percent with a given position of stock, your inclination is to continue to hold that stock since it looks like it’s going to continue to climb.

See also: The Art of Selling a Losing Position

The reality is that there is volatility in the stock market based on a number of factors, geopolitical events to name one. And even the good companies will slide down.

Typically, blue chip stocks will slide but not for long. And these stocks perform reasonably well and provide a nice little dividend.

So, holding blue chips are a given for long term positions.




Holding a Losing Position

There will be times in an investor’s life when a stock position will fall into the red, whether you just bought the stock thinking it will climb further and did just the opposite after buying, or you’ve had a relatively mid to long hold and the stock just went under.

My typical strategy is that if a stock position falls into the red, I sell at 5 percent loss, therefore cutting my losses and freeing up the money to invest in a better performing stock. And it would probably take a 6-7 percent gain on your next stock position to recoup the losses.

See also: Still The No. 1 Rule For Stock Investors: Always Cut Your Losses Short

I think this simple 5 percent strategy works and will keep a portfolio from having several losing stocks. Seeing a lot of red always looks bad, and can affect one’s confidence. So, it’s always good to know when you’ve lost and when to keep holding on to a winner.

I’ve heard of traders selling at 2 percent, and that could be a good strategy to minimize losses, but many great performing stocks might fluctuate and be more volatile. So, it’s also important to know the company and its performance history and how it has fluctuated historically. There are many factors affecting a stock’s performance.

But the 5 percent loss rule can be a good strategy to follow in keeping winners in your portfolio and freeing up funds to getting into better positions.

Buying Great Companies at Bargain Prices

Of course, losses can be minimized by knowing when to come into a stock position.

You want to always buy stocks from successful businesses at a good value. Many times investors and traders buy when a stock is rallying, instead of buying the dip.

And the only way to get good value in a stock is to buy when the stock is down, as opposed to when as stock is being overbought and at 52 week highs.

This is the hardest part of investing.

So you’ll want to check the charts to see a good buying point when it looks like the stock will rebound.

The RSI indicator is good for determining if a stock is being overbought, and thus is at risk of downtrending. Usually an RSI between 70 and 80 is a good indicator that a stock has reached overbought territory.

MACD indicators can be cryptic, but when a stock is in the red and begins to rebound back towards zero, it could indicate a good time to buy into that stock. Or when the MACD indicator just hits the first green bar.

There are many factors affecting the volatility with regards to stocks, so one must keep in mind all the geopolitical and economical factors that could affect the overall stock market. Then look at the overall performance of the sector in which a stock belongs, then look at the financials and fundamentals of each individual company.

Disclaimer: The content provided here is for information and entertainment purposes only. It is not intended as an offer or solicitation to purchase any investment. And this material should not be taken as investment advice, since investors’ needs and strategies may vary. Investing in equities is subject to extreme volatility.
Trade at your own risk.

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Carlos Rull

Carlos Rull is a musician living in the San Diego area. His interests include Yoga, Eastern Philosophy, Zen Buddhism, and Gardening. He plays drums, piano, and composes New Age & Ambient music, and his albums are available on iTunes and Amazon.com.

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