[theory6453]

I was thinking about posting a question to the group today so am glad this topic came up. Jere - get used to the quick advance. In only a few months I've had several advance pretty quickly on me. I am realizing that when it happens fast (or even slow) I find myself wanting to lock in gains - but you want to ride the winners as far as possible so at what point do you sell half??? I want to have a plan in place ahead of time so if a quick advance occurs, I have a rule to follow that can be followed with emotions set aside. Emotions get in the way when prices are moving significantly.

In the book he says you can sell half after a quick advance and then ride the other half using the stops he taught. I am trying to get a good idea on how to come up with a formula to identify a level where I'd sell half.

Don't have one yet. I think it should depend on how far and how fast, and maybe the price target if one is available? I really don't know. Looking forward to others thoughts....

Great question. Here are a couple things that I look for when deciding to sell / take profits…

First, I’ve learned from experience that it is futile to try to time the market, so I try to ask myself, “Do I feel comfortable locking in a partial profit here or do I legitimately think the stock is going to go higher?” If the answer is yes, then I use the couple indicators listed below to try to get the best price in the range where I am trying to sell. Also, I think it’s important to note that if you do decide to take a profit and the stock still goes up, don’t beat yourself up about it. Sometimes it’s going to continue higher after you sell and you’ll feel like an idiot that you hadn’t stayed in longer; other times it will go lower after you sell and you’ll feel like a genius. Either way, I think you should be happy you locked in a profit and you don’t get down on yourself about it… besides, by taking only partial profits you should have some of your position riding that wave higher.

Second, there are two indicators on Stockcharts.com that I like that can help pinpoint short-term tops and bottoms. The first and most important is Full Stochastics and the second is Stochastics RSI (both used with the default settings). Here is a good example from today using EGLE. Once I’ve identified that I want to buy / sell point on a particular day, I like to set the chart to 2 days with 5 minute intervals. You can read about these indicators at StockCharts ChartSchool at the links below but basically you want to buy when the Full Stochastics indicator breaks above 20 going up and sell when the indicator breaks below 80 going down. So, looking at EGLE, the Full Stochastics broke above 20 at 10am triggering a buy signal at around $6.40 and then continued upwards until around 11am when it hit $6.80 (7% move). In theory, you could then go short on EGLE at $6.80 as the indicator moved back downward, broke under 20, and then broke back above 20 at around 12:30 back down around $6.40 (6% drop). Again, you could buy back long at $6.40 as the indicator moved back above 80 and finally broke back down below 80 at $7.10 (11% move). The Stochastics RSI indicator is less reliable in my opinion but precedes the action of the Full Stochastics, so for example, if you are long and you see this indicator break downwards, get ready to sell and vice versa.

Now, the caveat is that this is all easier looking at this all in hindsight. It can be very difficult to buy and sell long-term based on these signals but if you are looking for short-term entrance/exit points this has served me well in the past.

http://stockcharts.com/school/doku.php?i..._oscillato

http://stockcharts.com/school/doku.php?i...s:stochrsi

Hope this helps… Look forward to reading others methods.