The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

THE THREE TYPES OF SELLING

Whenever you prepare to buy a stock, ask yourself whether you plan to hold it for the rest of your life and leave it to your heirs. Since your answer is most likely “no,” the next question must be: what will prompt you to sell this stock?

• How high does your stock need to fly for you to say “Enough!” and take profits? Do you have a specific price in mind, or a price range where you will consider selling? Is there an indicator pattern that will tell you the uptrend is becoming tired and it is time to take profits? The best time to answer these questions is before you enter a trade!

• What if your decision to buy was wrong, and the stock begins to slide? How low does it have to fall for you to pull the trigger and shoot? The worst time to make such a decision is when you own the falling stock. As it keeps sliding lower and lower, it will repeatedly flash signs of being oversold. Again and again, it will seem that the decline is at its end and about to reverse. If you are not prepared to take a quick and small loss, you can keep hoping and deluding yourself for a long time. Many traders suffer serious damage and sell in disgust only when they can no longer take the pain. The best time to decide at what price level to be rid of a stock is before you buy it!

• Finally, you might decide to sell a stock if it does not move as you expected or if it traces a suspicious chart or indicator pattern. What does this stock have to do to challenge your bullish ...