Should You Take Profits In Your Winners Or Hold For Bigger Gains?

About this video

• Video Title: Should You Take Profits In Your Winners Or Hold For Bigger Gains?
• Channel: Investor's Business Daily
• Speakers: None explicitly named, but content attributed to IBD founder William O'Neal.
• Duration: 00:04:16

Overview

This video discusses the crucial aspect of managing investment positions, specifically when to cut losses and when to take profits. It introduces rules and strategies for profit-taking, including a 20%-25% profit target and an 8-week holding period for strong performers, while also emphasizing the importance of flexibility and adapting to market conditions.

Key takeaways

• Managing Positions: Beyond selecting stocks, knowing how to manage them by cutting losses and taking profits is vital for investment success.
• Cutting Losses: A general guideline is to cut losses between 7% and 8% from the purchase price, or sooner based on the investment timeframe.
• Profit-Taking Rule: A foundational rule is to take at least some profit when a stock gains 20% to 25% from its buy point, as this is a common run-up before a potential correction.
• The 8-Week Hold Rule: If a stock hits the 20%-25% profit zone within 1-3 weeks after a breakout and the market is in a strong uptrend, consider holding it for at least eight weeks, as it may be a significant winner.
• Adapting to Market Conditions: In volatile or choppier markets, profit targets might need to be adjusted (e.g., 10%-15% gains), and stop-loss levels should also be tightened (e.g., 3%-5%) to maintain a 3:1 profit-to-loss ratio.
• Flexibility and Rules: While having rules is important, investors should remain flexible and let market signals guide their decisions, adhering to sell rules and established lines.