Exit Strategy & Etiquette Thoughts for a Stock…
Below are some thoughts I share to consider as a basic understanding for an exit strategy out of a stock. I usually post these thoughts on boards for a variety of reasons to include when I am asked.
One day, with any stock you buy, you will need to sell in order to realize gains so a plan should always be considered. I think that’s the reason most of us bought. I shared a few years back a few other thoughts that might be helpful to some just starting out with penny stocks from some of my experiences. Please note the $200 to $200,000 Transformation Process I posted a few years ago. It’s nothing new to many except maybe a discipline way to play with free shares. First, let’s talk about an exit strategy.
About an Exit Strategy for a Stock...
Selling a stock is generally centered on two variables; time and price. I would simply caution against having tunnel vision with getting locked into one or the other to an extreme. If a stock hits a certain “price” at a certain “time” sooner than expected, then I would sell. Since over 90% of the penny stocks fail, the odds are against you and any logic for holding them. Treat them all like a POS unless they prove different or reveal significant reason to re-consider, but understand that it is rarely the case. Remember and know that the odds are against you.
If it takes a longer “time” to hit a certain “price” then make the decision to continue to hold or sell, but know that you might be holding “dead money” to where those funds could have been used elsewhere. If you have really done your DD and believe in the stock, then exercise patience, but expect some up and down swings from people who will always be trading a stock. Respect everyone’s exit strategy to hold as a “trade” or as an “investment” because the first time you bash a decision one way or the other could be the time where action proves you to look very foolish. You just never know for many unknown reasons the end result.
Please understand, I am not telling you to hold any stock without any intentions of selling. I’m simply saying to be careful to not sell to early, especially on the first day of any run because there is always that chance you will regret it. A stock usually runs for 2.5 to 5 days before either stabilizing or fizzling out. Still those days are not finite as it could vary to be sooner or later. Still understand though that profits are profits. Unlike me, always remember to take profits (LOL).
Understand that what you see in stock ABCD at .01 per share to buy as an opportunity for profits to sell at .10 per share, you are hoping that the next person see that same opportunity for profits in stock ABCD to buy at .10 per share as a entry price that you saw in stock ABCD back when you bought at .01 per share. This is why it is important for substance and growth to be revealed in a stock because that’s what makes the next person buying stock ABCD at .10 feel as though they are buying shares of stock ABCD at a discount rather than the premium. This is what helps a stock’s price to hold its gains.
Some people would take it personal when you mention that you are selling stock ABCD to take profits at .10 per share while they are just now hearing or believing in stock ABCD and buying at .10 per share. Heck, if you get a 10 bagger, you should logically always take some profits. When you take profits it’s a personal decision and really isn’t anyone’s business. People should not ask if you have bought or sold a stock and you should try to make it a habit to not offer such info either. Normally when you start offering such info as a norm, people try to make you feel obligated to continue not at your discretion, but instead at theirs.
There were times where I and others were manipulated (long story) to where the more I tried to explain to people/shareholders, the more things got twisted. At one time, I had practiced telling people to consider me not owning any stocks at all whether I was posting on them or not, buying them or not, etc. because I could not and would not promise a time or price that I would hold a stock. Heck, most of the times, I don’t know. Read the story in the link below to understand one reason why I feel as I do:
http://ragingbull.quote.com/mboard/boards.cgi?board=CLB01219&read=103
It is my discretion if I want to risk selling stock ABCD to risk making more in another stock to maybe come back to stock ABCD later, or not. I have done such in the past where things had worked out for the better and for the worse. Others followed my lead and were upset because of the money they either “could have made” or “actually lost” for doing as I did. This is why I only would bring stock ABCD to you as an opportunity. How you “trade” or “invest” in stock ABCD is up to you. I am not a professional and rather far from it.
More thoughts should be considered for understanding when to “trade” or “invest” in a stock. Some people dislike those with a “trading” mentality while some dislike those with an “investing” mentality. I say both should be respected and understood to be important for the growth of a stock.
Those “trading” help to generate volume to bring a certain group of investors that reacts to a stock due to its volume. Those ”investing” in a stock help to bring the gradual support to a stock to help for a solid base to be established.
The survival and success of that stock will ultimately be determined and earned by the legitimacy of the company and generally not because of any of us message board shareholders. Both traders and investors are important for a stock in my opinion. Really, both are one in the same if you really are going to be technical about it. We all hopefully buy a stock to one day sell. After you buy a stock, you don’t lose until you sell, but you don’t gain until you sell either.
With this is mind…
See a trader as an “accelerated investor” as they are making an investment in that stock, but they are just doing such at a faster and much more accelerated rate than the investor because of simply selling their shares early.
See an investor as a “decelerated trader” as they are making a trade in that stock, but they are just doing such at a slower and much more decelerated rate than the trader because of simply selling their shares later.
Technically speaking, we are both a trader and an investor in any stock we buy. It’s just how you choose to interpret such for your own rationale.
Bottom line, it is your responsibility for knowing when to sell and at what prices. So please, if you are buying when someone else is selling, don t take such personal. Freedom of choice does exist in the market. Buying or selling a stock is your discretion and should be done so from you doing your own due diligence (DD). Understand that the responsibility resides with you alone. Unless someone was holding a gun to your head making you click the buy or sell button, take your own blame no matter how good or bad the stock you bought. The market will not stop for your sorrows or jubilees so continue moving forward regardless.
You probably won’t be the first to get into stock ABCD and probably won’t be the last. So don’t get all wrapped around the axel trying to figure out who got in before you. Buy a stock because you believe in the due diligence (DD) that “YOU” have done on the stock. Know that if you consider added anyone else’s info as part of your DD, then know that it is at your own discretion and the blame resides still with you.
Remember that people will normally be mad when you mention you are selling while they are buying. People will always seem to take such personal. I have found that it is always better to not get into such a subject. To keep the peace, consider keeping such thoughts to yourself. None of us like to hear things of that nature in dealing with any stock that we believe in. It’s always that subliminal thought to wonder if they are selling for bad reasons that are unknown. I have seen it better to not mention anything in that area because it only antagonizes individuals and question your true intentions for making yourself manifest.
Be careful in bashing a stock you don’t own. I see it kind of like an investor creed for being courteous to not a bash a stock if you are not in it because others could probably generate the same type of thought for your stock whether it’s fact or fiction. Why create the potential to entice others for having a reason to do so? Be careful in trying to save the world (meaning the entire investing community). I wish I could, but the fact of the matter is that I can’t. There is a balance that must be considered if you have negative to share to make sure it is factual and delivered constructively to save as many as possible if you can. Cautiously weigh the decisions to make sure you fully understand the situation to explain while not belaboring your point to antagonize others.
You will be rewarded or punished by the market principle of risk. Again, the responsibility still resides within you for your decisions. I consider myself an average investor like the many of you (maybe just a little above average every now and then). Having a process and sticking to it is half the battle. Below is the earlier process I mentioned concerning transforming $200 to $200,000 for you to read and understand at your own discretion:
The $200 to $200,000 Transformation Process...
The “$200 to $200,000 Transformation Process” is where you look to find 10 stocks that will potentially warrant 100% returns from a minimum investment of $200 to obtain wealth by exponentially having a monetary value of $200,000+ dollars. Below I have explained again how this could possibly happen.
The thing that is to be considered is not necessarily the stock, rather it’s the concept of the “$200 to $200,000 Transformation Process” that I think all should consider. The key is to remain discipline and flexible.
I will keep the math simple for calculation processing and I will minus the brokerage fees because of everyone having different brokerage fees. Observe what happens from investing $200 and it exponentially doubles 10 times beginning with Stock 1:
The “$200 to $200,000 Transformation Process”
Stock 1 = $200 to $400
Stock 2 = $400 to $800
Stock 3 = $800 to $1,600
Stock 4 = $1,600 to $3,200
Stock 5 = $3,200 to $6,400
Stock 6 = $6,400 to $12,800
Stock 7 = $12,800 to 25,600
Stock 8 = $25,600 to $51,200
Stock 9 = $51,200 to $102,400
Stock 10 = $102,400 to $204,800
It will be important for you to remain discipline and flexible to know when to move on. You might have to make the call to risk selling above 100% gains or selling at the 50% level for gains, or lower. You might even have to make the decision to pick a percentage drop to cut your losses to move on to a better opportunity. I will not make any decisions for anyone as everyone must be responsible for their own decisions for buying and selling. All I can do is share my thoughts that should be considered speculative in nature.
Something else to note, the higher you go up in money, the better the fundamentals you should be considering to minimize your risk; the choice is yours. Still, other variables will definitely have to be weighed whether to cut your losses and move on or to remain past your 100% gain as risk will always be a very important variable up for consideration. The key thing to consider here is the concept of remaining discipline as profits are achieved.
It doesn’t really matter what process you use; either the $200 to $200,000 process or whatever to your desire. Let’s use as another yet more conservative example where you take $10,000 and set your goals to make 20% return on 2 stocks per month for a total of 20% made on 24 stocks for the year. Let’s go one step further and figure you would use only major market stocks although using penny stocks still could be used under your discretion. Some would consider this to be less risky. Your 20% gains from a minimum of 24 stocks would look like the table below:
The “$10,000 from 20% from 24 Stocks Transformation Process”
Stock 1 = $10,000 to $12,000
Stock 2 = $12,000 to $14,400
Stock 3 = $14,400 to $17,280
Stock 4 = $17,280 to $20,736
Stock 5 = $20,736 to $24,883
Stock 6 = $24,883 to $29,860
Stock 7 = $29,860 to 25,600
Stock 8 = $25,600 to $38,832
Stock 9 = $35,832 to $42,998
Stock 10 = $42,998 to $51,598
Stock 11 = $51,598 to $61,918
Stock 12 = $61,918 to $74,302
Stock 13 = $74,302 to $89,162
Stock 14 = $89,162 to $106,994
Stock 15 = $106,994 to $128,393
Stock 16 = $128,393 to $150,472
Stock 17 = $150,472 to $180,566
Stock 18 = $180,566 to 216,679
Stock 19 = $216,679 to $260,015
Stock 20 = $260,015 to $312,018
Stock 21 = $312,018 to $374,422
Stock 22 = $374,422 to $449,306
Stock 23 = $449,306 to $539,167
Stock 24 = $539,167 to $647,000
Now imagine if you use half of that $647,000 that you have made for the year to start the process over again for the next year as you kept the other half as profits. Get even more creative and use 2 stocks per month for 10% gains with that process above instead of 20% for a thought too. That would give you an amount of $323,500 for the year. Whatever system or concept works best for you to be at peace with yourself will be fine as long as you maintain some kind of consistency with having a plan and setting goals to where you can have some direction in your inventing tenure.
Remember… people don’t plan on failing, they fail to plan.
Remember too... if you keep doing what you are doing… then you will keep getting what you have been getting.
If you do nothing, then nothing is what you should expect back in return as nothing ventured, nothing gained.
Only invest what you can afford to lose to where your conscience will not be disturbed if all was lost.
In the example above, no matter how much money your initial investment converts into as profits, it is still money that you never had so always take profits somewhere along the way while still understanding you will have to take “some” risks in order to achieve some gains. The choice will be yours to exercise the option to move on at anytime with your profits or losses.
Also consider the profits from the above logic if you discipline yourself to take 50% profits instead of 100% profits. Or five stocks instead of 10 stocks. Hopefully you see the magnitude from simply remaining discipline.
The above thoughts are thoughts to how I think we all should at least take under consideration for understanding investor etiquette within the market to derive an exit strategy on your own. One of my goals has always been to help many to become prosperous. Hopefully these thoughts can contribute in such!
v/r
Sterling
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Sterling's Trading & Investing Strategies:
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