Time to take Profits

Time to take Profits
By www.ProfitableInvetingTips.com

http://profitableinvestingtips.com/stock-investing-tips/time-to-take-profits
You have been invested in several
stocks for a year or more and have
seen nice gains.

When is it time to take profits? This
question comes to mind as we watch
the Chinese stock market lose the
spectacular gains it accumulated over
just one year.

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Before We Continue…

The rise in Chinese stocks happened
despite weakening fundamentals.

But investor confidence was strong.
Now The Wall Street Journal reports
that investors doubt that government
measures will sustain market gains.

Stocks in China fell a second
consecutive day as a government-
engineered recovery proved fleeting
and surprisingly strong growth data
dimmed hopes for more economic
stimulus.

The fleeting recovery of the China
market, which had trillions wiped out
of it in recent weeks, suggests
investor confidence is far from
returning in full.

The continued slide reflects
deepening doubts that Beijing can turn
things around, despite heavy
intervention in recent days.

A common opinion is that it would take
a genuine miracle for Chinese stock
prices to stay where they are.

Many have rightly decided that it is
time to take profits.

However, the time to take profits was
at the height of the market over a
month ago.

How can an investor get the timing
right in such cases?

Market Timing

Buy and hold investors can time the
market as well.

The point of assessing the intrinsic
value of a stock is to decide if it worth
buying or selling.

Market Watch tells how one buy and
hold investor times the market.

Mechanical market timing, which I use
for part of my own portfolio, is very
different from the emotional in-and-out
trading I just described.

Mechanical timing relies on rigid rules
or “systems” designed to identify times
when the market is more likely to go
up than down, and times when it is
more likely to go down than up.

This sounds like a form of prediction,
but it isn’t.

The systems I recommend are known
as trend-following.

That means they issue buy and sell
signals that are based on actual
market trends, both up and down.

When you design such a system, you
want it to be able to ignore short,
minor price trends that will turn out to
be mere “noise”

And yet react to price trends that,
based on lots of history, have a
relatively high probability of producing
a profit or of avoiding major losses.

The old saying is that you do not have
a profit until you have taken a profit.

Although the Chinese stock market is
down about thirty percent since its
high there are many small stocks that
have been virtually wiped out.

If you are going to invest in a market
whose rise is solely based on investor
confidence there is always the risk of
failure.

Setting an amount that you want to
gain out of a stock is a good idea.

When, for example, the stock has
gone up 30%, it could be time to take
profits.

And if it goes up another 30% what do
you do? It depends on why the stock
went up!

In the case of the Chinese market
where stocks rose as the economy
was cooling off taking profits routinely
would have been a good idea

And when the market started to trend
downward taking everything off the
table would have been a better idea.

Time to take Profits

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Time to take Profits