Buying And Selling Stocks: Profit Taking Guide & Trading Suggestions
Buying And Selling Stocks: Profit Taking Guide & Trading Suggestions

Buying And Selling Stocks: Profit Taking Guide & Trading Suggestions

Selling Stocks

 Buying & Selling Stocks  Rule 1

The first thing you need to do is divide your money into equal lots:

 Investing Money:

10-15 lots would be a good place to start. When you add more funds to your account, use the new money to create another lot. For example, let’s say we have a trading account of 100K.  To keep things simple, we divide that 100K into 10lots of 10K.  That’s part one of our strategy.

In part 2, we divide each of these 10 lots of 10K into sub lots of 3,3K and we deploy of these lots of 3.3K at time.  Let’s do an example.  We want to open a position in stock ABC.   The stock is trading at 45.00.    So you might receive instructions that look like this: purchase 1/3rd at in the 38.00 to 39.00 ranges and deploy another 1/3rd at 34.50 or better and place a stop at 27.00.

Now we will pace two limit orders and we will deploy 3,3K per order.   We are going to choose the midpoint between 38.00 and 39.00.   We place an order to purchase 3.3K worth of shares at 38.50 or better.  You can add a few dollars more to get a round number of shares.  For example, we would only be able to purchase 86.49 shares with 3.3K, so we can a few more dollars so that we can buy 87.00 shares or one could simply purchase 86 shares only.

Then we place a second limit order to purchase another 3.3K worth of shares at 34.50 or better.   We rarely issue instructions to deploy all three lots at one time. So if these two sub lots are deployed, you will still be sitting on 3.3K (last sub lot). If we are filled on both orders, we will issue instructions for the last 1/3rd of funds.  If not we can always deploy these funds into another position. Our focus is on getting into plays where the risk to reward is on our side and we never open a position at market price. We want to get in at the best possible price and these prices are determined by our risk to reward models.

If you come into more cash, say another 20K, you can either divide equally into the 10 lots of 10K or you can create another 2 lots of 10K, which means now you will have 12 lots of 10K.

Always maintain some cash (assign 1-3 lots for cash) for those mouth-watering opportunities that have a habit of suddenly presenting themselves.

If the portfolio has the word “Hold” in the comments section that means no new positions should be taken in it. Until the word “hold” is removed, no new money should be put into this position.

 Buying & Selling Stocks Rule 2

Allocate the same amount of funds to each position

Millionaire Mindset: Profit Taking Guide & Trading Suggestions

A person with a Millionaire’s Mindset is usually a very disciplined person, so never break the above rule. This might seem redundant but we are going to repeat it anyway as we have seen too many people ignore this rule, and then complain when things go wrong. When it comes to  Investing Money our money, deploy equal amounts into each position.

Never invest more in any one recommendation unless you are a seasoned trader or are knowingly willing to take on more risk. Most investors tend to lose not because of bad choices, but because of a lack of portfolio management skills. The fastest way to lose is to spread your money unevenly over your investments.

 Buying & Selling Stocks Rule 3

Tread lightly when it comes to Investing Money in options:

Never dedicate more than 20% at most of your entire portfolio to options, unless you are a professional options trader.  Once you generate profits, you can allocate more funds to options from the profits generated.   If possible try not to invest more than 2%-3% of this money into a single option position or open more than one position if the sum involved is above the stated limit.

The Millionaire Mindset only takes risks with money it can afford to lose; therefore, never invest your principal money into options. Only use profits to get into options.

What it means to take 1/2 or 1/3rd of a position

money lots thirdsWe usually divide our money into three lots but occasionally we might divide the given sum of money to invest in two lots. Taking 1/2 a position means that you divide the money you plan to invest in two equal parts. The same rule applies to a 1/3rd of a position; the only difference being you divide into 3 lots. we addressed this issue right at the beginning of this article. occasionally we will divide our money into two lots instead of three, but everything else is the same.

 Buying & Selling Stocks: The value of Stops

stop limit orderAll stops issued are limit stops. Do not use the standard stop, because if it is triggered you order will be treated as a market order. Example if you have an order to sell INTC at 30 and it trades at 29.95 your stop order will be triggered and a market order to sell will be placed; if INTC should suddenly drop to 25 you will be filled at 25 instead of 30. A limit order will be triggered when INTC trades below 30, however, you will only get filled at 30. Some brokers do not provide this option in which case you should use a mental stop or switch brokers.

Explanation of  a stop-limit order from Investopedia

stop-limit order is technically two order types combined, having a stop price and an equal or different limit attached. When the stop price is hit, the trader’s limit order is entered. For example, if the trader in the previous scenario enters a stop at $25 with a limit of $24.50, his or her order triggers when the price falls to $25 but only fills at a price of $24.50 or better. This type of order, depending on the limit price entered, could trigger but not fill. It is possible the price could fall through the limit price before filling the entire order, leaving the trader with remaining shares at a greater loss than anticipated. Investopedia

Set A Profit Target

Selling Stocks once the profit target is hitEach individual is different so we cannot tell you which target is best for you. Some individuals are happy with 20% gains, while others are ecstatic with 15% gains. Don’t force a target on yourself, choose one that you are comfortable with it and stick with it. At least do this for half your position. However, it is important that you come up with a target as soon as you open a position as

While we do our best to get you in at the best price, we do think you should pay some attention to the exit as nobody cares about your money more than you. Secondly, our profit strategy might not fully mesh with yours.

The higher the profit target, the more volatile the ride is and the higher the risk. If you hit your targets earlier consider it as a surprise bonus and take time to enjoy the other simple things in life.  The Millionaire Mindset has a profit target and loss target. You should give equal attention to both targets as its an essential part of the investing cycle.

Do not get emotional

Selling Stocks and emotions The market has no mercy for emotional investors. The two worst emotions in terms of investing are fear and euphoria. So do not let your emotions do the talking.  Emotional traders nearly always end up in the red.  Understand the basic concepts of mass psychology it could greatly enhance your trading experience.

Anyone with the Millionaire Mindset will refuse to allow emotions to enter into the equation. Once emotions do the talking, one’s money does the walking, therefore it is of the utmost essence that when you trade, you trade with a cool mind. As the old saying goes revenge is best served cold and there is a reason for this saying; hotheads usually end up broke as they have no capital left to stay in the game. The stock market is war, you can lose several battles but you can still live to win the war.

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