How to Sell -- A Checklist, continued
#2. Cutting Losses Short
- Cut all losses when a stock is 7% - 8% below your purchase price (no exceptions...there are risks in all stocks). IBD readers who followed this rule were able to protect their capital better than most other investors.
- Operate with a basic profit-and-loss plan. In a strong bull market sell and take most of your profits when up 25% to 30% and cut every loss short at 7% or 8%. Your very best performing stock, in some cases, can be held for a larger potential profit.
- If you buy stocks in a tougher, whipsaw general market, maintain a 3-to-1 ratio by taking profits at +20% and cutting losses at 6% or 7%. Or take gains at +15% and cut losses at 3% to 5%.
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Related Resources:
Review IBD's 20 Rules For Stock Market Success.
Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.
Search our archive of Ask Bill O'Neil Q & A's organized by topic.
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