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Strategies & Market Trends : Charts for Breakout II
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To: Julius Wong who wrote (1706)11/9/2003 8:02:32 AM
From: Ed Newman  Read Replies (1) of 8531
 
All of Julius' comments on selling are good. Here are a couple more.
Selling should be based on your strategy. If you believe the broader market is going to go up and you believe you have found an absolute stellar winner that will be growing for years, (SunW in 90s or Cisco or AOL or many others) you should not concern yourself with short term downs or non-movement.

The idea of Stops is like insurance, however. People like William O'Neil (Investors Business Daily) teach that if your stock retreats 7-8% you should sell rather than keep riding it down. The further down your losses go (25% down, 40%, etc.) the more pressure you will feel to sell. MANY people ride companies down to bankruptcy and foreclosure because "I have gone this far, I might as well see what happens."

Psychologically here is the key: Accept the fact that your timing will be wrong sometimes. You will not always call it right. No one is unerring in the market. No one. So you want to reduce risks and minimizes losses, hold on to gains.

IF you sell and things resume an uptrend, there is nothing wrong with buying again.

One other thing... If the whole market starts to retreat and your positions all begin to erode, you will end up with more cash on hand to pick up shares for the next bull move. There is nothing worse than having all your money tied up when the bottoms come because you did not sell.

Hope these ideas help.
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