When to sell

displaced dub

Hi All

I have watched certain share in my portfolio over recent months make nice gains, then they loose them just as quickly.

Basically what im looking for from frequent traders is when do you decide to sell, is it when your up 20%? 30%?

im currently hold both BP and Royal Dutch Shell, the yields are good on these so i wont sell them, but for instance Ryanair doesnt have a divi, at what % gain should i sell Ryanair?

This is melting my head as i have watched good gains being eaten away day after day hoping for a bounce.

woodseb

ideally, you should make the decision on what level to sell at before you buy

now, i suppose you should ask yourself whether your capital is better employed in your current portfolio or would be better off in something else

20-30% is an excellent return in normal times, you would be waiting for long time to get out of investments if you wanted that return.

Idu

woodseb wrote: »

ideally, you should make the decision on what level to sell at before you buy

Pick your out based on your expectation for the stock and stick to it. Use stops if you must to lock in profit if you want to take a chance on extra gains but watching stocks go up and down endlessly is not going to be as profitable in the long run in my opinion.

As for picking percentages out of the sky thats just a fools errand. If you have bought Ryanair it is, I would presume, because you believe it is currently undervalued or will outperform its peers. In your research you should be figuring out by what percentage that will be, not simply saying I'll take a 20% gain on this.

Plan the trade, trade the plan

foxyboxer

Use a trailing stop loss.
For example, you have €50,000 capital.
You want to only risk 1% of your capital on a trade = €500.
You like Paddy Power at €23.99 on Monday 25th January.
You will use a 10% stop loss = sell at €21.60

Using the following calculation, You can determine how many shares to buy
http://oak.ucc.nau.edu/del/stockcalcs/sizer.aspx

So You will buy 209 PP shares at 23.99 = €5,013.91
Should the price fall and go to €21.60, You will sell
21.60 * 209 = €4,514
You will only lose 1% of your capital. You still have €49,500 overall.

With the trailing stop loss, should the price of Paddy Power rise, You will adjust the stop loss upwards each time the price increase.

E.G. On Friday 29th January, the price is €24.59
Your 10% stop loss is now €22.13
Should the price now fall (you would make less of a loss), You leave the stop loss as it is. Only ever increasing the stop with an overall increase in price.

Trailing Stop Loss:

Share P Trailing Stop
€24.59 €22.13
€24.99 €22.49
€25.15 €22.64
€26.03 €23.43
€26.93 €24.24

Before you get in, know when you'll get out!
This method works really well with protecting your capital and locking in profits.
This coupled with sound fundamental analysis is an excellent strategy.

displaced dub

foxyboxer wrote: »

Use a trailing stop loss.
For example, you have €50,000 capital.
You want to only risk 1% of my capital on a trade = €500.
You like Paddy Power at €23.99 on Monday 25th January.
You will use a 10% stop loss = €21.60

Using the following calculation, You can determine how many shares to buy
http://oak.ucc.nau.edu/del/stockcalcs/sizer.aspx

So You will buy 209 PP shares at 23.99 = €5,013.91
Should the price fall and go to €21.60, You will sell
21.60 * 209 = €4,514
You will only lose 1% of my capital.

With the trailing stop loss, should the price of Paddy Power rise, You will adjust the stop loss upwards each time the price increase.

E.G. On Friday 29th January, the price is €24.59
Your 10% stop loss is now €22.13
Should the price now fall (you would make less of a loss), You leave the stop loss as it is. Only ever increasing the stop with an overall increase in price.

Before you get in, know when you'll get out
This method works really well with protecting your capital and locking in profits.

excellent post Foxy, clear and concise.

Just a quick not on the 20%/30% in my original post, these figures just popped into my head and i fully understand that a share that rises that much is a rare thing indeed.

Raskolnikov

displaced dub wrote: »

Hi All

I have watched certain share in my portfolio over recent months make nice gains, then they loose them just as quickly.

Basically what im looking for from frequent traders is when do you decide to sell, is it when your up 20%? 30%?

im currently hold both BP and Royal Dutch Shell, the yields are good on these so i wont sell them, but for instance Ryanair doesnt have a divi, at what % gain should i sell Ryanair?

This is melting my head as i have watched good gains being eaten away day after day hoping for a bounce.

First thing, I'm glad you've gotten out of the Irish equities.

Second lesson you need to learn; you're trading WAY too much. History tells us, that the only person who gets rich by trying to time the market is your broker, as he racks up a commission each time you buy and sell. BP, Shell and Ryanair look like decent, long-term investments. The best thing you can do is just hold them and don't try and time the market.

I would consider myself a very active investor, yet I would maybe make 10 trades a year. If you're making more trades than that, you would really want to be thinking twice.

displaced dub

Raskolnikov, thanks for the post, as you know im still pretty new to this and have made some fu*k ups and trading too much is one of them.

the tend to panic is starting to go away and i generally try to leave the portfolio alone as much as i can, im currently at a loss, pretty much because of a 2nd gamble on irish banks. but i moved away from them entirely now and wont be going back down that route again.

i will be getting divis of approx €1100 this year from what i have. i haven't abandoned irish stocks altogether holding CRH Smurfit and Ryanair still.

Raskolnikov

Panicing and selling when a share price goes down will ruin you.

I bought shares in a company called Steak N' Shake in 2007 for $310 (split adjusted). When the bottom fell out of the market in 2009, they fell to as low as $70. Because I was still confident in the company though, I bought more at that point, around the $110 mark. Since then, the shares are back up to $320.

If you ask me, volatility and falling stock prices are wonderful things. I was watching one company last year that reported great numbers, but because everyone hated stocks at that point, the share price went down anyway.

Idu

Raskolnikov wrote: »

I bought shares in a company called Steak N' Shake

The name alone is worthy of investment imo

Raskolnikov

Idu wrote: »

The name alone is worthy of investment imo

Are you familar with the Chairman, or are you just taking the mick?

Idu

Just think it's a brilliant name. Had never even heard of it before you posted

Raskolnikov

Idu wrote: »

Just think it's a brilliant name. Had never even heard of it before you posted

If you're into investing, you should most definitely read about the Steak N' Shake story. The guy who runs it is something if an investment prodigy, and wants to turn the company into a conglomerate in the style of Berkshire Hathaway. He's only 32 and has went from nothing, to heading up a 1/2 billion dollar company.

pog it

If stop loss means what I think it does and your shares are automatically sold at the rate you have chosen as your stop-loss point, then I reckon this is a terrible idea if you are investing rather than speculating. If you buy shares in a company you should expect them to go up.. even if there is some volatility in the market and they go down for a while. The worst thing you can do is set a stop loss.

rugbyman

pog it wrote: »

If stop loss means what I think it does and your shares are automatically sold at the rate you have chosen as your stop-loss point, then I reckon this is a terrible idea if you are investing rather than speculating. If you buy shares in a company you should expect them to go up.. even if there is some volatility in the market and they go down for a while. The worst thing you can do is set a stop loss.

Hello pog it, about 18 months ago there was fierce debate on here about stop loss and whether or not it is a good idea.

On balance it sems a good idea. Though a sudden dip can incur a loss, that you might not have intended, it means there are no major losses.
In the event of a stop loss kicking in and your shares being sold, if you believe that much in that share you can then buy again,posibly even at a lower price.
Regards Rugbyman

foxyboxer

From Yesterday's Sunday Times.....

"Follow Warren Buffet's 2 rules for investing (1) Don't Lose your Money and (2) Don't forget Rule #1

Idu

pog it wrote: »

If stop loss means what I think it does and your shares are automatically sold at the rate you have chosen as your stop-loss point, then I reckon this is a terrible idea if you are investing rather than speculating.

This is such a short sighted view. The key to trading is downside risk regardless of the time frame.

pog it wrote: »

If you buy shares in a company you should expect them to go up.. even if there is some volatility in the market and they go down for a while. The worst thing you can do is set a stop loss.

The key word there is expect. Just because you think you're right doesn't mean its always going to be the case, regardless of how long you wait. In the markets your first plan should be for the unexpected. People are so afraid to admit they're wrong or to take a loss, its natural but these feelings are totally counter productive in trading because nobody can be right 100% of the time and the key is to make sure your losers are small and your winners big. The last thing you want is your capital tied up in a stock that's losing money.

Essentially it comes down to your own investing strategy but 99% of people who make money trading have tight downside. Read the Market Wizard books and see what each trader's number 1 key to success is. It's a short list

pog it

I have read the Wizards books and am reading the Intelligent Investor. Things like 'only invest 5% of what you can trade with on one idea'. They resonate and I understand where you are coming from of course about minimising your losses and I do operate risk control, I just wouldn't be interested in stop losses. I do not have an ego, or any significant problem with regards self control or self pride, so I naturally have no problem being wrong about a stock and so, Idu, I would be continuing to weigh and watch the level of my stock after inital investment and if significant news was unfolding that looked very much like I should sell, then I would, yes, absolutely. I'd have no problems admitting I made a mistake and I would hope to learn from it. But I 100% certainly would not be myself interested in setting up stop losses.

I am getting more from the Intelligent Investor than any other book I've read.