Avoid Selling At the Highs

SAY WHAT!?!

That is correct sir (or ma’am), avoid the pitfall of needing to get out at the highs with every trade. Because guess what? You’ll fail at it 99.9% of the time. 

So often we try to get out at the top, mainly because of the pain and anguish we’ve experienced in the past of when we sell a trade, make some nice coin off of it, only for it to go higher and then lose out on the opportunity to have doubled or tripled our gains by having held on longer.

Then we take that painful memory and we apply it to future trades. Instead of scaling out gradually, or selling a stock on strength, we instead, keep trying to get every dime we can out of the the stock and remembering what happened last time we got out too early. We see a huge push higher, and instead of selling half a position, we start fantasizing about what could be, if if it goes up another 10%, 20, or 30%. 

But let me tell you, getting out too early is 99% of the time, better than getting out too late. 

Most often when trading breakout plays, they can offer you the world and then pumel you with an iron fist. I traded MTG today for a nice 4.25% gain, but I could have made more than 10% had I stuck with the trade.

Am I mad about it?

Nope!

Knowing what I know now would I have held on to the position longer?

Of course I would have, all the way until its highest point of the day.

But we will never be afforded that opportunity….ever. So often though, after we have an experience like what I had with (MTG) today, where it ran an additional 5% from where I got out, we carry that memory into our next trade (which has absolutely ZERO correlation with the new trade), as if it is some kind of do-over for the previous trade. Instead of getting out when we should, we instead hold out due to some morbid belief that this time we will get it right. 

Unfortunately, you won’t get it right, That I can promise. Your goal should be to take profits on strength, and if you come away with what you wanted, or originally set out for, consider yourself a success. The stock will trade long after you get out of it, and it won’t care a lick about where you got in or out at. And it will continue to trade perpetually, higher and lower into the future, regardless of whether you ever get back in. So disattach yourself from the symbol, from the chart, from the pundits, message boards and anything else that says something about the stock you just sold. Because you came out with your gains in hand, you sold on strength, and whatever the stock wants to do after you get out of it, is the stock’s own business…not yours. 

But if you keep always trying to be last one out on the way up, you’ll only end up being the first one who should’ve have gotten out.