Wednesday, January 28, 2009

Market-Fu selling

The market has changed a lot in the preceding post-market, pre-market, and three trading hours. The $VIX is down another four percent but more importantly, the S&P is up almost two and a half percent.

Since the market is up, my stocks must be up. In fact, my Google investment paid off well... it is up five and a half percent! Which brings up the next topic of Market Tao. When to sell.

The conundrum
I was very happy that my stock was up considerably, and wanted to lock in some of that profit thus ensuring several days worth of lunch money. On the other hand, I didn't want to exit the position. The way that I analyse its charts, more up-side potential exists. Another consideration is that I would be devastated by losing the profit made, and devastated if the stock went up more without me.

The Market Fu solution is two-fold. First I sell off some of the position to keep profits, and pay commissions. Second, I make a mental note to buy more shares when Price pulls back to a less extended value.

Its a simple solution and hopefully will serve me (you?) well.

Google did continue to rise. I sold the remaining shares at six percent profit. Yay! That is a significant lesson now internalized in my personal Market Tao.

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