Buying And Selling Stocks: Profit Taking Guide & Trading Suggestions
Buying And Selling Stocks & How To Use This Service

Buying And Selling Stocks & How To Use This Service

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Buying And Selling Stocks

Buying And Selling Stocks Rule 1

The first thing you need to do is divide your money into equal parts or amounts.   For this example, we will be using a 100K portfolio. This is just for illustration purposes. Many of our subscribers have portfolios in the 10K to 30K ranges. Whether you have 10K or 100K to invest, the rules are the same.

 Investing Money:

Divide your funds into 10 equal parts, so each part will consist of 10K.  These parts will then be divided into lots and in the market update, we will refer to this as lots or 1/3rd of a position. It basically means the same thing.  So each lot or 1/3rd will equal 3,333.

Never commit all the funds to a given play in one shot and never buy at the market price.  Let’s assume we want to get into GOOGL as of July, 27 the price is 1,527.   Now let’s look at a typical set of instructions.  Deploy one lot at 1450 or better and deploy the 2nd third in the 1370 to 1380 ranges.  Note that lot and 1/3rd refer to the same thing, which in this case means committing 3,333 per order. Hence, two orders would be entered, one at 1450 or better and one in between 1370 and 1380, let’s take the midpoint and enter a GTC (Good To Cancel)  limit order at 1375. For each order, only 3,333 would be used.

Some traders get confused with the terminology of buying one lot at 1450 or better.  In simple words, it means that you don’t pay more than 1450.  The objective is to get into the position at 1450 or lower.

Generally speaking, we issue instructions for a maximum of two lots at a time. The third lot or the last 1/3rd is deployed if and when the first two orders are filled. So in the above example, we would issue instructions to deploy the last lot or the last 1/3rd into GOOGL only if both the pending orders were filled.

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 existing parts of 10K or you can create another 2 new parts or position of 10K, so now you would have a total of 12 cash positions each equally 10K.

Always maintain some cash for those mouth-watering opportunities that have a habit of suddenly presenting themselves.

On occasion, we might divide our funds into two lots instead of three lots. If and when we do this we will clearly state so.  Utilising the above portfolio, it means that we would have two lots or two thirds equally 5K.   In this instance, the instructions would be something like this; Deploy one lot or one half into MTCH at  90 or better and one lot at 75 or better. In each instance, you would enter GTC orders and commit 5K to each order, one at 90 or better and one at 75 or better.

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.

Do not get into any stock or option unless it is trading at or close to the suggested entry points. For example, we established a position in VRNS at 99, the stock surges to 126, then pullbacks to 109, one would not open a position as the stock is not trading near our entry point. However, if the stock pulled back to 99 or 100 or even 101 one could deploy one lot (1/3rd of your funds) into this play.  Another example  NFLX, if we got in a 290 and the stock surges to 575 and then drops to 400, you would not get into it as its trading well above our entry point. However, if we opened another position 390, which means we have two positions in this play one at 290 and one at 390, then if it drops to 400, one could deploy one lot into this play.  When it comes to options make sure if you are getting into an option that we already have a position in, that the option has at least 6 months of time on it. If not look for an option that has more time on it. In general, do not get into option plays, unless you are well versed with options.

Buying And 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 And Selling; Tread Lightly With 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

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.

Buying And 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. For a more detailed explanation please read this article Understanding Limit, Stop Limit and Market Orders

Set A Profit Target

Note the following strategy is optional. In other words, it is for the trader that wants to take his or her trading skills to the next level. We will always issue entry and exit instructions for every play in our portfolios. We will never leave you in the dark.

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.  It is important that you come up with a target as soon as you open a position as you are likely to change this later on.

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.

There Is No Place for Emotions In The Market

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.

Explanation of the Color Codes used for Pending Stock plays

All plays labelled in Green have a lower risk associated with them than plays labelled in Brick Red Text. Additionally, a stock that is labelled in Green text in the Trend portfolio has a lower risk associated with it than a stock play carrying the same colour (green text) in the Moderate to the high-risk portfolio.  The same rules apply to the ETF plays; ETF’s labelled in green are lower risk plays, while those with Brick Red Text carry a higher risk.

We have divided the stocks into primary and secondary candidates to make it easier for new subscribers. New subscribers should focus on the primary candidates to start with and then once you get used to our methodology, you can mix and match. Plays under the primary candidate’s section are associated with a lower risk than plays that fall under the secondary candidate’s section”

Portfolios associated with the lowest risk are the primary candidate’s section in the Trend portfolio and the primary candidate’s section under the ETF Trend Portfolio.

We will generally try to keep the plays to 10 or less in the primary candidate’s section. However, if we close a position out in our portfolio, then we will issue new play under the primary candidate’s section. Hence from time to time, there may be more than ten plays. All stops are now “end of day stops”; the stop is only triggered if the stock closes at or below the suggested price of the stop.  For more details on “end of day stops” visit this link   Detailed Info on Stops

When it comes to buying and selling stocks, patience and discipline are the two most important traits newbies should master. If you chase a stock, you are bound to pay more and in doing so you lower the odds of coming out ahead. At the tactical investor our rules are simple when it comes to buying and selling stocks; get into stocks with strong setups at the best possible price.

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