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Scaling Profits To Lock in Gains and Hold Winners Longer

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Video: https://youtu.be/wI3xksGfKmA

 

Probably the trading question that I am most often asked is, “when is the right time to sell my winners”?

1.TRADER TIME FRAME – Position management decisions should be based on trader time frame.

  • I have an intermediate to longer-term time frame, so I am looking for positions that I believe can gain 25 to 50% in 3 to 6 months and 50 to 100% over 6 to 12 months vs my current trend following stop levels of generally 12 to 15%, based on current market volatility.
  • In low volatility markets, my trend following stops are usually 10 to 12%.


2. PROFIT SCALING – HOW TO HOLD BIG WINNERS LONGER, LOCK IN GAINS, AND REDUCE RISK.

  • I am a firm proponent of maximizing winners and holding them while they are still working and also cutting losers quickly and within my pre-defined risk/stop limits.
  • I have no fear of giving back some gains, and confidence in my ability to follow the process and work through regular day to day volatility.
  • I don’t want to sell a stock in an uptrend for +5 to 10%, if there is +30%, +50%, or more to be made in the trade.
  • I’ve had countless +30% to +100% or more winners over 23 years, so I know that the process works.
  • If the position is holding the trend and working, I want to press my winners.

BENEFITS:

  • Book gains along the way.
  • Stay in big winners for more potential gains.
  • Eliminate the daily pressure of all-or-nothing mindset.


3. SCALING IS THE BEST OF BOTH WORLDS

  • I utilize a process that lets me lock in partial gains on the way up, raise my stops to reduce open risk, but most importantly stay in the winning position to maximize the trade potential.
  • If I lock in partial gains and the stock comes back down to an exit, I have locked in gains higher.
  • If I lock in partial gains and the stock keeps moving higher (ideal), then I am still in the position and avoided selling my winner too soon.
  • Given the choice of having some marginal winners come back down, or selling a potential triple digit move too soon, I opt to hold for the bigger potential move.
  • At times, I will give back some gains, but the magnitude of the major winners greatly offsets the reversals.
  • I used fixed percentage gain increments, example, at +20 to +30%, I’ll often book 20% of the open position and hold the rest, +30-40%, book 20% of the open position, etc.
  • I go into more detail on our Members site.

Big winners, (+30% or more), aren’t always easy to come by, so once they start to work, I want to stay in the trend.


SCALING EXAMPLE

NVDA BUY
4/30/21
$611.66 ($152.91 split adjusted, $128.60 stop, split adjusted)

 

SCALE 1
6/28/21
+30.0%
Stop moved up to reduce risk. 

 

SCALE 2
8/24/21
+41.4%
Stop already above breakeven at 162.10, as of 7/23/21. 

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