Friday, November 12, 2010

Selling in a Bull Market

The Nifty is in some kind of a correction. While it is possible to make money by going short during these corrections, the big money will still be made when going with the main trend - up. Yet, learning to sell is important.

1. We sell to reduce market risk. When our charts suggest a topping out pattern, ot signs of a correction then we close our trading positions to lower the risk of our portfolio. Your decision to sell is made when you see distribution in the time frame you trade.

2. We sell to reduce individual stock risk.
■Sell a stock that you may have bought incorrectly (i.e., too early, too late after a breakout buy point, a stock pattern fails or you erred in reading a chart incorrectly) and performance disappoints shortly after the purchase.


■Sell any stock that has a surprise including such events as reporting an accounting error, a badly missed earnings announcement, a significant top management change or terminated merger and acquisition discussions.
■Sell a portion of a stock position that, because of a large run, ends up comprising too large a percentage of your total portfolio and thereby increase its risk .

■Reduce exposure to an industry group if it falls out of favor.

■Sell a stock that has underperformed the market and you expect to continue doing so over the near term future as measured by its relative performance during the time you’ve held it

(Rules adapted from stockchartist.blogspot.com)

But, go ahead and sell. Buying and selling together make up the trading plan. So buy, and, when required, sell.

6 comments:

tushki said...

sir pls suggest me the pattern for rel capital for short term...it has been forming lower tops and breaking down whenever nifty dips few points...i hold 5000 shares at around 830.

Sri said...

Sir,

An interesting article.

http://www.cnbc.com/id/40147765

rajiv malik said...

it is shocking how market fell like pack of cards breaking all supports. just few days back all was gung ho and everyone was talking of new highs and very firm base in place. it does look like a tricky evil designed game to loot and rob the retail investors who are gullible and believe the crooks peeling out dreams of higher and still higher levels.......

scorching said...

Hi Sudarshan,

I am holding Neyveli Lignite futures position at 157 but it has closed below 200 DMA though with less volume. How is chart looking for you? Do you see any bounce back in near future or will it go down to test 140 levels?

Thanks
Manju

rajiv malik said...

sukhani ji, all this talk of low levels is scary to those who are holding any calls and longs. what is the bull case ? or is it all lost ? can we not have a big profitable bounce on monday ? why cannot all those waiting for buying the dip come and start buying on monday and compel the shorters to cover their shorts making it a great monday for bulls ?

shyamu said...

hi sudarshan,
I am holding balrampur chini of 500 shares which i bought at 92 rs.I want ur suggestion regarding the stock.Do i need to stay long or sell at any target price.I am short term trader.
Suggest me some midcap or small cap stocks.
thanks,
shyamu