Mostly: Classical

[Sexton O Blake]

Exit strategy?

Last nights Financial Sense Online editorial by Hartman touched on something I need more help in.


Exit Strategy?

I don’t have quite enough time today to comment on precious metals and commodities except to say that the charts of gold, silver and natural gas are solid. Natural gas should break out from its current consolidation to the upside as we move into the cold season. Silver still remains my favorite investment.

I would like to write much more on trading strategies, but for now I think it is very important to at least touch on exit strategies. If you do not have an exit strategy for your current holdings, you are making a very common mistake. Investors tend to work much harder at their due diligence in researching a company to buy, but fail to make plans or targets for the sale. I have a rule for my own investing that says I can not buy a security or commodity without having an exit strategy. In other words, when you buy a stock, bond or commodity, what is your expectation of future performance in terms of time and price.

With that being said, where do you stand with an exit strategy for your current long positions? On the buy side, many investors including myself use multiple buys to accumulate shares, averaging the overall entry prices for a given position. I usually break my buys into three chunks and LIKEWISE, develop an exit strategy of averaging the sell price since it is nearly impossible to sell right at the ultimate top. For the investors that have recouped much of their prior losses, and for those that have made some gains in the current rally, it is probably time to start averaging out of the stock market. As I said earlier, you can always go back when the risk-reward relationship improves.

The same can be said for those of you out there that have participated in the run-up in gold and silver stocks. You don’t want to be left behind if the big move hits, but it’s not a bad idea to gradually move back to cash as the gold and silver stocks rise. I have been in the PM’s rally since the beginning, so I’m gradually generating some cash with profits. With a blow-off in PM stocks I will take another 10 to 20 percent off the table, then with confirmation of a pull-back, I will sell the remainder of my PM trading positions while holding my core positions.

As I said earlier, I would like to cover trading topics in much greater detail, but for now please consider how very valuable an exit strategy can be. It will certainly change along the way, but your chances are better if you have a plan going in.
.. Sept 10 - Mike Hartman

Here is the URL
http://www.financialsense.com/Market/daily/wednesday.htm