Instant Alerts

Soon after I complete a trade for my personal account I spell out for you the specifics of the trade (stock, price, time, target objective, stop loss), the chart I used to arrive at the decision and a brief explanation as to my reasoning for the trade. Each trade also has a link to either the Google Finance or Yahoo Finance page for the stock for more research on the company’s fundamentals.

I’m not a day trader and the pool of money I work with is fixed. Early in a market cycle, I might make several trades a day; at other times, there may not be any at all for several days. Mostly I trade individual securities but also often include commodity, country, currency, interest rate and index ETFs trades.

When I’m fully invested in good stocks and the market cooperates by trending higher, I hold my positions and may not make many trades. But when the market begins to enter reversing, most of the trades will be sales. I do have some specific sell rules:

  1. Sell to Reduce Portfolio Level Market Risk: The only time you must sell stocks is when the market is peaking, topping and entering in the Distribution Phase of its life cycle.
    • sell stocks incrementally to adjust your risk exposure target several times as the market moves down. Pick a target percentage of cash that’s appropriate for various levels of the market risk.
    • Since the objective is to reduce exposure, it almost doesn’t matter which stocks you sell or in what sequence. The goal is to reduce risk and whether the cash is generated in all in several stocks or through portions of many stocks almost doesn’t matter.
    • When the portfolio level risk is acceptable, do nothing.
  2. Sell to Reduce Individual Stock Risk Level: Stocks with momentum that have appreciated substantially will tend to continue moving up. In short, decisions to sell stocks should be the exception rather than the rule and those exceptions fall into the following categories:
    • individual stocks where risks associated with that stock appears to have increased:
      • Sell a stock that you may have bought incorrectly and performance disappoints shortly after the purchase.
      • Sell a stock that has a surprise event such as reporting an accounting error, a badly missed earnings announcement, a significant top management change or terminated merger and acquisition discussions.
      • Sell a portion of a stock position that, because of a large run, ends up comprising too large a percentage of your total portfolio and thereby increase its risk.
      • Sell a stock that has underperformed the market and you expect to continue doing so over the near term future.
  3. Sell a stock opportunistically to generate funds to take advantage of a stock you believe has relatively greater potential than the successful stock position you’re selling.


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