re: Averaging Down/Averaging Up

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The next problem I have is when I should sell something for a profit. What are your typical thresholds?

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For years, I've basically followed the Investor's Business Daily rules for when to sell winners and losers on swing trades:


Why Use Sell Rules?

Once you buy a stock, when should you sell? Many investors simply don't have an exit strategy — and their returns suffer accordingly. But you can use time-proven sell rules to make a huge difference in your portfolio.


Limit Your Losses to 7%-8%

Even the best stocks will sometimes break out, and then drop to slightly below their ideal buy point. If your stock declines more than 8% it usually means something is wrong with your chosen entry point, the company, its industry, the general market, or all the above.


When to Take Profits

One of the greatest feelings is seeing your stock's price go up. But how long should you let it ride before taking cash off the table? During a healthy market uptrend it's smart to take most profits at 20%-25%.


The 8 Week Hold Rule

If a stock has the power to jump over 20% very quickly out of a proper base, it could have what it takes to become a huge market winner. The 8-week hold rule helps you identify such stocks. When your stock reaches a 20% gain in less than three weeks, hold for at least eight weeks.


IMO, the most important thing when it comes to trading (or investing) is to have a rule set (the one above or some other) that you consistently use. To be consistently profitable, you have to have a consistent process or methodology.

I don't mean to offend or criticize anyone (I'm happy to see everybody making money however they manage to do it), but the guys on here whose "strategy" is to just follow hot penny stock tips from anonymous posters here or on Reddit or Twitter don't have a real strategy. That's truly just gambling (and doing it without any sort of probabilities or basis). Card counters gamble, but they're using well thought out probabilities. That's why casinos hate them with a passion. As traders, we're allowed to "count cards"... if we choose to.

Hope that helps some.