Trader Tip:
- Use a plan and stick to it.
- Study and educate to a sector. Become an expert at something.
- “You will be wrong, you will be wrong often, and, occasionally you will be spectacularly wrong”-Barry Ritholtz, Real Money.com
- Just like a good exercise program, with trading you must build your strength, NOT rush to lift 200 lbs the first time. Paper trade. This builds muscles
- Stop “noise”. Do not approach the markets randomly, trying and studying many approaches, reading versions of charts, and “mixing up” rules and systems. The # 1 problem we see is “impressions” people have off their study, but only in the “partial” they have learned. It's much like learning to play golf wrong; it's hard to unlearn.
- After you trade, study what happened. Keep careful notes on what you did, and what you didn't do. Learn from successes and failures.
- Develop your odds of success by finding what you do best. This is where studying your “journal of trades” shows where you focus in best, and should allow you to duplicate the emotions and rules when you do right.
Core Selling Rules:
- Pay NO attention to bid/ask. This is what other traders, just like you, want.
Put your order in at a limit order, good for the day, for the price you want to sell the option, and reduce this price during the day if market conditions so warrant. - Work for mark ups of 40% down to 20%. Risk traders may hold for higher %'s, and many successful traders use the .50 to 1.00 a contract profit model.
- Lower your selling price to the averaged cost you have paid, and sell the position clearly within stop loss.
DO NOT HOLD IN HOPES THINGS WILL CHANGE. THE ONLY REASON PEOPLE HOLD OPTIONS TOO LONG IS HOPE.
It is hard to sell a stock at a loss when we believe that we are skillful investors. But are we really that skillful? We can and should control basic investment things like minimizing taxes, keeping trading costs down, and maintaining the quality of our investments.
But no matter how much effort we put into beating the market, we’ll probably be disappointed. We figure that if we spend enough time hunting for hot stocks and searching for the superstar mutual funds, we will spot them.
This is an illusion. We can only control our investment results in a basic way. The rest, for better or worse, is just good or bad luck.
- Sell if your stock drops 8-10% from the price you paid. I can't repeat this often enough. If the price begins dropping on high volume, don't wait for an 8% haircut - sell it now.
- Continually re-evaluate to see if the same reasons are still there for owning the stock. If it isn't one that you would buy today at today's price, sell it.
- If the stock creeps up for several days on very light volume and there are other sell signals, this is a good time to sell it.
- If after months of advancing, the stock suddenly jumps way up on heavy volume, maybe 25% or more in just a week or two, it will probably pull back significantly. This is called a climax top. When it makes its biggest one-day rise, sell.
- When a stock suddenly jumps up on weak volume, sell.
- If a stock closes at the bottom of its day's trading range on high volume, consider selling half your shares.
- If a stock drops below its 50 day moving average on heavy volume, or closes down on record volume, sell.
- If there are 3 days with the market dropping on heavy trading, reduce your positions. This may be signaling the start of a bear market, or a baby bear.
- If the Put/Call Premium Ratio (found in the Wall Street Journal and IBD) rises to over 2.0, begin reducing your positions. A big market drop is on the way within a few months.
- Don't ever sell and take a profit if your leading stock runs up 20% or more in only 2 or 3 weeks. Most market leaders last a year or more
- On any bad news about a company whose stock you own, sell. Wait until the air clears and the stock begins rising again before repurchasing.
- When you review your portfolio of stocks, the laggards will clearly stand out. Sell them and buy more of your winners. As many wise investors have found, it’s a good practice to weed your garden regularly.
http://www.oexoptions.com/pages/SampleAlert.pdf
http://www.atozinvestments.com/selling-stock-advice.html
http://www.actwin.com/kalostrader/CANSLIMDesc.htm