Are you selling your stocks at the right time?
Finance → Stocks, Bond & Forex
- Author Dmitry Vysotski
- Published April 9, 2007
- Word count 617
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 a service that does all the monitoring and calculations for you, and gives you selling recommendations in plain English.
Sell@Market (http://www.sellatmarket.com) is a brand new 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, Sell@Market emails you a recommendation to sell.
There is nothing that even the best strategy can do to protect investments if an investor is not following its recommendations. Sell@Market 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.
Dmitry is a co-founder of Sell@Market.
He has more than 5 years experience in investment analysis and more than 7 years experience in software development. Dmitry holds a MSc in Mathematics and Computing and a Degree in Economics and Finance. His certifications include SCJP 5.0. Always sell your stock just at the right time with Sell@Market! Try the service free of charge for 30 days. Sign up at: http://www.sellatmarket.com/signup
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