Do you add to profitable positions if you think theres more money to be made?
Talking both short side and long side.
if your long 100 shares of a $100 company, with a stop loss at 90, and it goes to $130, then do you buy more stock to maintain the overall risk level when you move up your stop loss, or do you take profits? This is assuming you believe it has much higher to go.
Answers
731 points
thinker70 answered 8 months ago …
No simple answer, each situation could be unique but as a general rule given the limitations of stop losses protecting your down side, I would be more inclined to take some profits on a $30. move and hope to buy in again on a DIP if I really liked the companies prospects. The situation might be totally different with a !0. to $20. stock which might have much more upside potential than a $100. stock.
It is very rare for any stock to go straight up or down so there are no hard and fast rules to my way of thinking. Marketing timing is difficult at best but if you can ride the cycles, (whether up or down) grabbing the middle 2/3rds as profit could be a viable objective, buying when a particular stock hits the bottom of its trend line, selling when it breaches the previous highs, but every stock needs to be evaluated on its individual merits.
4075 points
EthanR answered 8 months ago …
If I bought a stock at $100, and it went up to $130, I would take a long hard look at the technicals. It seems to me it would be very overbought and due for one heck of a correction. So my tendancy would be to wait to buy more on a pull back, and I might even sell my position (30% profit), then re-buy it on a good pull back. Another possibility is to keep the long position and short the stock if it's overextended, then cover the short when it pulls back to an oversold level.
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368 points
ads answered 8 months ago …
If I felt that the company had substantially more upside potential you bet I would. But I'd need to feel nearly certain that it had a lot more upside potential (and I'm not talking about looking at the technical charts, but rather at the company’s intrinsic value and potential for future revenue growth). But then I don't look at maintaining "risk level" on anything. As I don't invest in something if I feel it is risky (although many of the investments that I've made over the years others have considered to be risky), and as such I've never lost money on a trade yet. And before anyone says that I'm full of it, this is the truth, as I do very extensive research prior to making any investment and then only invest what I can afford to loose, so that if I do loose on an investment it won't hurt me financially. Right now for example my investments are down, however every last one of them are companies that either have some great products or services with a hell of a lot of potential, or are extremely profitable and with phenomenal sales and earnings growth but are greatly under-valued.
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2769 points
Oldman answered 8 months ago …
I'd use a trailing stop-loss vs the stock's sector, set about 25% below the peak price initially. This way, if the general market (SPY or DIA) drops, but the sector maintains, then you have an apples to aplles comparator. Ther's no way to be sure a short won't whipsaw you unless the options are so collared that you don't make much return...or you are glued to a real time Bloomberg terminal.
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