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  • May 14th, 2021 8:52 pm
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[OP]
Deal Guru
Dec 11, 2008
10142 posts
1613 upvotes

When to Sell

Hi guys, just wanting to get some feedback here on your exit strategies.

What triggers you to evaluate and ultimately sell an investment? Is it a percentage gain? Percentage drop from high? Percent loss acceptable?

Thanks!
20 replies
Deal Addict
Dec 10, 2012
3705 posts
1269 upvotes
Canada
buy high, sell low works out great for most people.
Deal Addict
Jul 23, 2007
4480 posts
3072 upvotes
speedyforme wrote: Hi guys, just wanting to get some feedback here on your exit strategies.

What triggers you to evaluate and ultimately sell an investment? Is it a percentage gain? Percentage drop from high? Percent loss acceptable?

Thanks!
Usually some time after a dividend cut. I may also decide to sell if a company's management stops increasing the dividends over a few years. If one of my companies gets acquired by another then I sell.

Other than that I just keep them in the portfolio and when I can, I may decide to add more shares to them.
Deal Fanatic
User avatar
Jun 19, 2001
8772 posts
2446 upvotes
As soon as I buy, I set a stop loss (other then on the CDNX, which td doesn't offer0 . At most 8% below, usually far less. Which leads to a lot of small losses, but no big losses. It also leads to consistant overall gains.

The number of people on rfd buying highly specualtive stocks and holding all the way down is unbelievable. Look at the cannibis thread, they are doing it again lol

It is a very good time to be in cash. The only ones who are right all if the time are...liars!
Last edited by zoro69 on May 11th, 2021 2:58 pm, edited 2 times in total.
Deal Addict
Oct 26, 2005
1225 posts
163 upvotes
Toronto
This is a very generic question so I'd say it really depends on what type of investment I have (e.g. stocks, crypto, ETF's, NFT's, etc.) along with the timeframe (e.g. day/weekly for swing trades, medium term or long-term) and what my goals are. Even then it gets further broken down into what type of stocks, crypto, ETF's, NFT's I have. Some are short term holds (e.g. GME, MVIS) which maybe bought/sold on ~10% swings, other's are long term plays that I plan on holding for years. So ya, it depends Smiling Face With Open Mouth
R.I.P. Prodigy
Penalty Box
User avatar
Dec 16, 2015
2805 posts
2481 upvotes
Toronto
Buy low, buy the dip, sell lower, and rebuy higher coz of fomo
To the moon
[OP]
Deal Guru
Dec 11, 2008
10142 posts
1613 upvotes
zoro69 wrote: As soon as I buy, I set a stop loss (other then on the CDNX, which td doesn't offer0 . At most 8% below, usually far less. Which leads to a lot of small losses, but no big losses. It also leads to consistant overall gains.

The number of people on rfd buying highly specualtive stocks and holding all the way down is unbelievable. Look at the cannibis thread, they are doing it again lol

It is a very good time to be in cash. The only ones who are right all if the time are...liars!
Thanks. Right now what we do is set 15% once we buy and then monthly we update the 15% based on the peak price since we bought.
[OP]
Deal Guru
Dec 11, 2008
10142 posts
1613 upvotes
theinfamous wrote: This is a very generic question so I'd say it really depends on what type of investment I have (e.g. stocks, crypto, ETF's, NFT's, etc.) along with the timeframe (e.g. day/weekly for swing trades, medium term or long-term) and what my goals are. Even then it gets further broken down into what type of stocks, crypto, ETF's, NFT's I have. Some are short term holds (e.g. GME, MVIS) which maybe bought/sold on ~10% swings, other's are long term plays that I plan on holding for years. So ya, it depends Smiling Face With Open Mouth
All Canadian stocks. This is for our Non-Reg account as we are using HELOC to fund this.
[OP]
Deal Guru
Dec 11, 2008
10142 posts
1613 upvotes
Stryker wrote: Usually some time after a dividend cut. I may also decide to sell if a company's management stops increasing the dividends over a few years. If one of my companies gets acquired by another then I sell.

Other than that I just keep them in the portfolio and when I can, I may decide to add more shares to them.
Thanks, for some of the stocks in question they were a bit speculative in a sense that they were expected to go up 20-30%+ and since then they have gone up, do we sell or hold? Their yield covers our HELOC borrowing cost....

We have set a 15% drop from peak - updated monthly for notification
Deal Addict
Jul 23, 2007
4480 posts
3072 upvotes
speedyforme wrote: Thanks, for some of the stocks in question they were a bit speculative in a sense that they were expected to go up 20-30%+ and since then they have gone up, do we sell or hold? Their yield covers our HELOC borrowing cost....

We have set a 15% drop from peak - updated monthly for notification
I can't help you there. I'm never thinking about selling if an equity goes up by 20-30% and over the last near forty years of investing I was never interested in buying on leverage of any kind. Too many things can go wrong. Back in the financial crisis of 2008 - 2009 the TSX had gone down at one point by over 50%. I had no plans to sell out and we didn't. In fact we were buying through the crisis with whatever little cash we had at the time.
Newbie
Jul 2, 2014
46 posts
46 upvotes
Ottawa, ON
my rule is never sell at a loss so you don't have to figure out capital losses on taxes, too complicated. Hold until it becomes a gain, even if it takes 20 years
Deal Expert
Jan 27, 2006
17929 posts
10676 upvotes
Vancouver, BC
To answer your question, I'll ask you another question - why did you buy this stock vs. another stock? The answer to my question will basically give you the answer to your question when the situation becomes the reverse.

Examples -

A. If you brought X which is an oil company because you believe oil is going to go up in price due to supply issues and demand increasing, then the time to sell X is when the story changes - ie supply is increasing and/or demand is decreasing.
B. If you brought Y which has been a long term dividend payer which increases its dividend at a good rate at a regular interval, then the time to sell X is when the story changes again - ie they decide to cut the dividend, not increase it for a while or lower the rate of the increase.
C. If you brought Z for an upcoming event, then the event happens, it's time to sell as your original reason to buy the stock has happened.
[OP]
Deal Guru
Dec 11, 2008
10142 posts
1613 upvotes
craftsman wrote: To answer your question, I'll ask you another question - why did you buy this stock vs. another stock? The answer to my question will basically give you the answer to your question when the situation becomes the reverse.

Examples -

A. If you brought X which is an oil company because you believe oil is going to go up in price due to supply issues and demand increasing, then the time to sell X is when the story changes - ie supply is increasing and/or demand is decreasing.
B. If you brought Y which has been a long term dividend payer which increases its dividend at a good rate at a regular interval, then the time to sell X is when the story changes again - ie they decide to cut the dividend, not increase it for a while or lower the rate of the increase.
C. If you brought Z for an upcoming event, then the event happens, it's time to sell as your original reason to buy the stock has happened.
Thank you. That was my thinking as well as we have a mix of these. I guess another specific question that may be personal is if these examples above get triggered, do you act immediately or give yourself a percentage/range before action?
Deal Expert
Jan 27, 2006
17929 posts
10676 upvotes
Vancouver, BC
speedyforme wrote: Thank you. That was my thinking as well as we have a mix of these. I guess another specific question that may be personal is if these examples above get triggered, do you act immediately or give yourself a percentage/range before action?
Neither... you do some research and see what happened. Generally, once the public knows about the news, everyone knows about the news and the current price of the stock is reflecting the current public feelings about the stock - ie you probably won't gain much if anything by selling right away at that point. However, if you do a bit of research, you might like the new story that the company is now doing and elect to hang on and see. Or you might hate the idea and sell.

A recent example is ATD. They have been just a gas station/corner store type of outfit for the longest time and do excellent work in that area but the recent attempt to purchase a large French supermarket chain has basically changed the narrative - ie they are venturing into something that they haven't really done in the past. Some investors hate the idea as they believe the company is nuts to do so... Others love the idea seeing that electric cars will change the narrative on gas stations anyway so now is a good time to change the narrative.... Which one is right? Who knows at this point. However, you can see by the share price performance, the shares dropped right away and are now moving back up...
Sr. Member
May 2, 2019
539 posts
648 upvotes
Vancouver
speedyforme wrote: Right now what we do is set 15% once we buy and then monthly we update the 15% based on the peak price since we bought.
The problem with this approach is that you'll never sell at the best price. Also percentage-based rules are generally not great at setting the best levels. Especially as you use individual stocks, they have their own "personality"; 15% moves have a very different meaning, say, for Tesla vs Apple.

I should say it's great you have a plan at all. Executing a plan (perfect one or not) is much better than acting on emotions, which are guaranteed to drive you toward losses. Your plan is still profitable. You should at least have some profit targets. A reasonable first target is from 1:1 to 2:1 profit compared to your risk. So if you allowed a 15% downside at the start, you could sell a portion of that position (say, between 1/4 and 3/4) once it riches 15-30% profit. It's not very important what you pick from those ranges, but it's better to make that pick in advance, again to avoid emotions.

Ideally, stop loss levels should be not fixed percentages, but based on some meaningful market action in the past (support/resistance levels). Market behaviour is strongly affected by psychology / prior actions of participants. If you don't want to go that deep, you can stay with percentages; maybe at least differentiate percentages for more and less volatile stocks.

It's also a valid strategy for long-term to trade without a stop-loss as mentioned above: when a trade is based on a thesis and you hold while the thesis holds, or even go as extreme as never sell at a loss if you can afford that. If you have no stop-loss, then you don't use near profit targets either to avoid the case of big losses and small gains. No stop-loss works better for the whole market and sometimes sectors, but for individual stocks it is still better to accept the fact they can fail. Especially with large losses, the tax savings alone can recover more of your buying power than a realistic probability of that stock recovering.
[OP]
Deal Guru
Dec 11, 2008
10142 posts
1613 upvotes
yvrbanker wrote: The problem with this approach is that you'll never sell at the best price. Also percentage-based rules are generally not great at setting the best levels. Especially as you use individual stocks, they have their own "personality"; 15% moves have a very different meaning, say, for Tesla vs Apple.

I should say it's great you have a plan at all. Executing a plan (perfect one or not) is much better than acting on emotions, which are guaranteed to drive you toward losses. Your plan is still profitable. You should at least have some profit targets. A reasonable first target is from 1:1 to 2:1 profit compared to your risk. So if you allowed a 15% downside at the start, you could sell a portion of that position (say, between 1/4 and 3/4) once it riches 15-30% profit. It's not very important what you pick from those ranges, but it's better to make that pick in advance, again to avoid emotions.

Ideally, stop loss levels should be not fixed percentages, but based on some meaningful market action in the past (support/resistance levels). Market behaviour is strongly affected by psychology / prior actions of participants. If you don't want to go that deep, you can stay with percentages; maybe at least differentiate percentages for more and less volatile stocks.

It's also a valid strategy for long-term to trade without a stop-loss as mentioned above: when a trade is based on a thesis and you hold while the thesis holds, or even go as extreme as never sell at a loss if you can afford that. If you have no stop-loss, then you don't use near profit targets either to avoid the case of big losses and small gains. No stop-loss works better for the whole market and sometimes sectors, but for individual stocks it is still better to accept the fact they can fail. Especially with large losses, the tax savings alone can recover more of your buying power than a realistic probability of that stock recovering.
Thank you for your insight. Right now it is an alert so we haven't made a move. But it is definitely something to allow us to keep a pulse on movements; in a sense.
Jr. Member
Aug 15, 2016
137 posts
175 upvotes
In my active accounts I often sell partial positions to take profit when a stock has gone up more than I expected and I think there is a better opportunity in something else. Most of my buys are value based so I tend to buy when I think something is discounted and sell when I think it is fully valued. Admittedly it's not always a science and I might sell something if I feel the thesis isn't playing out or the market has fundamentally changed. When I am looking at starting a position or selling down I try to sell on days when the stock is up and buy on days it's down but it doesn't always work out perfectly.
Sr. Member
Sep 30, 2013
531 posts
453 upvotes
North Vancouver
When you actually need the money.
Deal Expert
Jan 27, 2006
17929 posts
10676 upvotes
Vancouver, BC
TGoyel wrote: When you actually need the money.
Sometimes that's not a good idea. I've ridden a stock all the way up and all the way back down because I didn't need the money at that time when it was up...

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