2 methods for taking profits

In the past I’ve written in detail on my profit-taking philosophies. As a
quick refresher, I believe you must have a systematic strategy for taking
profits. Depending on your style and personality, you may choose one of two
methods for taking profits: 1) Too early. 2) Too late. In other words, don’t
plan on selling at the top. You either need to sell into a bounce or rally, or
you need to trail a stop. For most of my trades, I typically take a portion of
my profits too early and a portion too late. The size of the portion depends
on my market outlook.

In my last column, I stated that I was trading in “Bear Market Mode”. I
suggested that part of trading in Bear market mode entailed taking profits
quicker — in other words — too early. Some have asked “how do you know when
it’s safe to try and let some winners run again?”

Easy — let your trades be your guide. You don’t need to perform detailed
market analysis. The time will come to go for longer profits when they start
making themselves available. When you look at charts of stocks you took quick
profits on and think “damn, I should have held on to that one for a bigger
gain” then it’s time. Stocks will be trending higher rather than just
bouncing, and your trades will tell you that. It is at this point that you may
begin to take profits more slowly.

Best of luck with your trading,

Rob