When is the Right Time to Bail on a Stock
Nothing in this crazy game we play bugs me as much as being up 50 cents or a dollar daily, only to need to decide what to do another day since the stock is down to my purchase in price. Can I let it wiggle lower? Should I hold tight to a fanciful stop? Will it shake me out, just to roar higher?
Yet it is undeniable. It's part of the game and it is something each and every one of you're going to need to manage at some point. If you become involved in any sort of investing there are times when a stock will confound you like this. The big question is this: Can you stand on some silly principal, or do you take things into your own hands and do something?
I think you must move more times than not. Allow me to explain. Suppose you buy XYZ at 50.50 and it closes at 51.00. You feel great, things went your way. However, the next day that the futures are down due to extra dryer lint, locusts, floods, hurricanes, oil, hangnails, Martians, or what have you. So, your inventory opens at 50.65 and seems to drop from there. Sure enough ten minutes after it is at 50.50. Can you sell or hold????
My theory is that you look around the marketplace. Nothing's going to swim upstream unless it actually gets the momentum or some kind of information to propel it. Consequently, if the general market is fading, odds are your stock will fade too. More times than not the best thing to do is bail out, and if you enjoy the darned thing, return in the next time it runs up over 50.50.
Sure you are going to eat up commissions, but please do not be foolish. Take the hit and proceed with your life. I'd rather bail out apartment five occasions, than take a 1 dollar hit a 1000 shares of stock.
Now, if your inventory is fading, but you notice signs that the sector is beginning to perk up, perhaps it's worth holding on a little. Perhaps it's worth holding to your inventory right down to your stop, so if the market turns everything greater, yours will turn with it.
The choice isn't simple and you're not likely to get it right all of the time. There are times you will sell apartment, in the very low of the day and kick yourself. There are times you will hold to your stop, and realize you need to have sold flat. But then again, there are times it works and you feel like a million dollars because you didn't get shook out and the stock regained.
There's not any easy response to this and I really don't care what market guru tells you there's. I struggle with it every day, and you'll too. Try and use your best judgment, do not be afraid to pull out level, and do not be afraid to go back in if you must. It is all part of investing in a current market, so don't let it throw you. Yes it stinks, and a trend will grow. Hang in there.