Reporting season can be a tricky time at best. In the good times the odd negative surprise can be brushed off as just being a mere blip and all will be forgiven in time.
But soon we will start reporting for first half corporates and beware the nasties. There will be negative surprises and if you have ridden the wave of the last three months you might want to think about taking some profits.
We often talk of stop losses in terms of our ‘buy in’ price but it is less often traders think about taking profit once a certain ‘positive’ outcome has been achieved.
You will have heard of the adage ‘… you never lose money in taking a profit’. Yet few traders manage this discipline.
We can all experience fear and greed and if you have been in the market over the last couple of years even if you have not experienced either of these two extreme emotions I am sure you will still understand what I am talking about.
Some investors never learn to control these emotions and repeatedly buy at the top and sell at the bottom.
I have previously talked about possible exit points and one of these can be a simple trend line break on a weekly line chart. This works well after a long trend but when we have ridden a short but strong trend like over the last several months then it can be tough to decide if it is time to get off the ride and take profit.
If you have the view that you bought well back in March and that what we are in is a new bull market then what I am writing about may be totally irrelevant. If however some of your buys were not perfect positioning perhaps now is a time to at least think about culling out those that are not performing.
Because when the big guys take profit the little people can get squeezed and especially in a low priced illiquid stock you can see a large profit disappear in a few days. The hardest aspect I found to master in trading or investing was being the contrarian.
You can only be the contrarian by taking chips off the table when all is going gangbusters. It is hard to do but it is worth the bravery. Try it - even if it is just for one or two of your trades. Acquire the taste – it can be oh so sweet – and addictive
Enjoy the ride