Thread: Programed selling

I came across this idea some time back, can't remember where. It obviously would not have worked in the current market and I have never actually done it myself, at least not on purpose. It is a simple system at face value. It involves selling a pre-determined portion of a position so that the remaining position has a net cost of or near $0. Now there is no specific percentage return that you would sell at, that is purely up to the...

I came across this idea some time back, can't remember where. It obviously would not have worked in the current market and I have never actually done it myself, at least not on purpose. It is a simple system at face value. It involves selling a pre-determined portion of a position so that the remaining position has a net cost of or near $0. Now there is no specific percentage return that you would sell at, that is purely up to the...

Mike, I have known quite a few Fools over the years that have used modified versions of this strategy. One doesn't have to only sell after a double. People will set sell points at many return points. The primary idea behind this is to preserve winnings and mitigate losses. If your up by 33% sell a 1/3. You capture some of the profit and lowered your downside risk by having less on the table. You are correct that this approach has higher...

There's nothing novel in that approach. It's also hard to defend at the extreme you've described ("the remaining position has a net cost of or near $0) unless it's been done over a long period. If an investment's making money it does make sense to lock in some of the profit at some point, especially if it's skyrocketed. OTOH to sell such a large portion of your investment suggests that you a) believe...

Mike, Google "scaling out of a position". You'll get plenty of hits. Also try "position sizing". Kaufman evaluates various scaling techniques somewhere in his Trading Systems and Methods (3rd. ed.) Also, look at such books as Chande, Beyond Technical Analysis ; Sweeney, Campaign Trading ; Jones, The Trading Game ; Gehm, Quantitative Trading & Money Management ; Tharp's books, etc. In other...