Successful traders master the art of selling by knowing their trading stats.

When learning your style, you should keep records of your average win percentage, average loss, win rate, and days held.

Tracking these stats will help you realize your strengths or weaknesses and learn to sell according to your averages.

Let’s say your average winning gain is 6%.

If you see a gain of 8%, consider selling some. If the price goes back down, you have already successfully increased your average gain.

If your average hold time on winning trades is 15 days, consider selling if you have been holding for 20 days, and the price is becoming extended (more on this later).

Scaling out allows you to lock in gains while letting partial positions continue higher. This secures profit and helps you manage the remaining position better.

Master the Art of Selling: Multiples Of Your Risk

R-Multiples is a concept developed by Dr. Van K. Tharp to help traders compare their gains against their initial risk.

When you take a trade, determine your stop loss. The initial loss that you decide upon will be titled R1. If your initial loss is 5%, consider selling some when you see a gain of 5%. This quick action allows you to sit with the trade longer. If the price returns to break even, you have already made a profit on your initial risk.

2R is a multiple of your initial risk, 1R. If the initial risk is 5%, then 2R is 10%. If you sell half your position at 2R, the price can go back down to your initial stop, and you will break even on the trade, avoiding any loss.

Scaling out at R-Multiples is a mathematical way to lock in your profits. Many top-performing traders desire a 3:1 win-to-loss ratio. Selling some at 3R and raising your stop on partial shares to break even will ensure a profitable trade.

Master the Art of Selling: Extended From Moving Averages

Stocks have character – You may have heard, “Look left to plan right.” By analyzing the previous price movement of a stock, you may see patterns that tend to repeat. These patterns may also indicate when a stock might be at a shorter-term top.

As with anything, the type of trader you are will determine what moving averages you use.

When your stock advances, observe how far it is extended from the moving averages. When the stock pulls back in, make note of the previous extension. If you see the stock similarly extended again, consider selling.

Case Study: NVDA 2021 with 50 SMA

In the spring of 2021, NVDA broke out of a nine-month base. Looking at candlesticks only, the first bearish signal occurred when the daily high was greater than 20 percent above the 50-day simple moving average.

Two weeks later, we saw the same percentage extension as the price began wedging higher (another clue showing weakness). There were six days allowing you to sell strength before the price gapped down and formed a new base.

When NVDA saw climactic action, the daily high surpassed 40 percent above the 50sma. Three days later, on a large bearish reversal candle, again, the high of the day was greater than 40 percent above the 50sma.

Master the Art of Selling: Selling Strength Allows You To Hold

Trading around a core position is an advanced way of buying and selling as the price of a stock moves up and down. Ultimately, we want to hold a stock to capitalize on a larger move.

Selling into strength guarantees profits, but what do you do with the remaining position?

Remember, you are never going to sell the exact top. As you scale out, you may want to hold a smaller partial position to allow the stock to move.

Selling weakness can then be utilized as a method to hold your remaining shares. Possible approaches to this may include:

• Closing below short-term moving averages (10 day)
• Sharply breaking intermediate-term moving averages (21 day)
• Closing below long-term moving averages (50 day/10 week)
• Breaking horizontal support areas

Putting it all together

Remember: You are trying to make money! As the stock you are trading advances in price, you may become emotionally attached to the thought of it will increase forever.

Eventually stocks will begin to decline.

Will you be able to withstand a loss as your position works against you?

When you scale out into strength you are locking in your gains while reducing the potential drawdown of your account.

Until next time, we wish you success in the markets,