Stock Selling Rules Q&A View Select Entries from Our Mailbag. Also See Our Q&A Page.
Q: Dear GSA, First off I want to thank you for your support over the years! I have a question for which I know there is probably no single answer, but wanted your thoughts. I have been a subscriber for years and have done a lot of churning, not really making money. In the past I would put trailing stops and loose a lot of potential gain due to a stock's normal volatility, or I would sell with an initial 8% loss only to have the stock reverse and end up with a large gain. So for 2010 I have committed to follow your top picks. I have bought them all in 2010, and also immediately put in the stop loss orders at the point you suggested. Amazing how if you really follow the advice of the pros, how well you can do!! duh....
My question is, are you putting in trailing stops to protect your gains? I would assume NO, because otherwise you'd email us, but I was just wondering. Clearly I'm feeling the need to "tinker" which has only got me in trouble in the past. So I am assuming that "we" sell when you sell?
First of all, thanks for your membership support over the years - it is greatly appreciated.
To answer your specific questions, we DO NOT have a trailing stop on all
positions, specially during the first 8 weeks of holding. However, we do
monitor our positions daily, and know where we would exit at a loss (7 to
10%). You mentioned that you get stopped out at -8% and then watch the stock take off again. You MUST buy that name again, even if it means buying it a few points higher. Think of it like fishing - sometimes it takes a couple of attempts before you finally grab it for good.
Now on the profit side. We try not to touch our holdings for 8 weeks, unless of course we get stopped out. At the end of 8 weeks, we decide if we want to take profits, or if we want to hold for a longer term play. We've
outlined this decision point in our Trading Rules page. If you're sitting on a 30% or more profit at the 8 week point, maybe you want to maximize gains. We don't trail the stop up by a fixed amount or ATR, if the stock keeps moving up. Give it some room! However, we do look at the 20-day, 50-day and our GSA Stop Loss line for clues whether to exit. Sometimes you may even catch the very top of a move, if the stock reverses off a new high. It's definitely an art, and not a science at this point.
When we sell, we try and outline / write-out the reasons why we sold.
Sometimes we're right and sometimes wrong. But we fully expect that.
Not sure if I've answered all your questions , so feel free to reply.
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