What’s the Deal With Selling Too Early

Trader Scott

First of all, this is generally about shorter term trading, although investing has many of the same principles for me, but just expanded in time and price.

Why do I always sell too early, and why doesn’t it seem to bother me? It does bother me, but not nearly as much as it used to. And here are two recent examples mentioned at the other website – MUX and FNV. With the arcs showing the buying zones (volatility/accumulation zones) and the arrows showing selling too early before the upside volatility got started. I do not want to be long a full position in that mess.

My mentor SW, was an outstanding pure trader, knew zero about charts BTW, and to his last day as a floor trader his biggest gripe was all of the money he would leave on the table. But he knew the “secret”, the “magic” to this business was the great entry point. And taking profits, and not guessing where the high would be. Selling should be easy, it’s the entry point which is the hard part. It took me a long time to figure out why I sell too early, but at that point it became much easier to accept. And it also became easier to accept when I sold too early, when the stocks/market would often come back to well below my original sell price – and often after having put in some or a lot of upside ending action (volatility). It’s in the volatile areas, and we have a position, when, here we go, the guessing, predicting, and confusion really kicks in. And that is in no way what I want to deal with – it’s more stress, and that thinking is more TOXIC. So why sit thru the volatility, and the uncertainty into EA, and the stress of dealing with it – selling when the market is easy to sell into works much better for me.

So it’s really about focusing on the first sale, or the partial profit. After that, I’m willing to let a stock have more room to rally and react – to do it’s normal stuff in preparation for it’s next move. And when we’re buying, likewise, we should give a stock plenty of room to be volatile and accumulate.

So we can take partial profits, and move a stop up to break even, and then at least we’ve pulled something out of the trade. And the key here is we’re already long, we have a position, therefore we have RISK. When we’re out of the market, we have no RISK. The approaches need to be totally different. Many people use a method almost exclusively to both get them in and to get them out. Which is perfectly fine if it works for them. I use a method to some degree to get in, along with trading skills, but getting out is almost all trading skills, along with using resistance areas (to get out of a long position). It’s an overall approach. It’s the deal with having a long position which is going up strongly, and then it hits up or blasts thru resistance, and promptly turns back and heads down again. Then we’re back to guessing, trying to figure out if that was the high, or just a high, etc. I want to sell when it’s on the way up, and when a market order is often filled well above the price when you decided to enter the sell. In other words, when it’s easy to sell. Meaning, getting something decent out of the trade. No one pays us for this business, we need to pay ourselves. How can we pay ourselves if we don’t take profits?

I want to buy using the volatility working for me, not against me. Meaning, looking to enter a long position into the downside volatility areas, but getting out of a position before the upside volatility kicks in, because the volatility areas are when selling, and using market orders, can be much tougher. It’s all about RISK. When we’re not in the market, and we have no RISK, that is one approach. But when we are in the market, we do have RISK, so I want to lessen that RISK at the times/prices which I perceive to be most favorable to me. And that’s when it hit me about selling too early. Markets are not about rewards, they are about RISK. So entering into a trade, is not about reward, it’s actually about RISK. So this business comes down to putting on RISK, and taking off RISK. It’s that simple.