Do you skim the top?

Just wondering what people think about this practice.
Cut a long story short during the past couple of days got the urge to “cash in” some smaller positions
and actually went ahead with it too!

Is this something other people do, ie take a profit now and then?!?

Not looking for validation of what I’m doing just generally curious of what others think (just in case I missed the iceberg for scanning the horizon like…)

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Sometimes. It depends on the stock and my appetite for risk, although I try to never sell any of my long term holdings. Sometimes a stock can look a little overvalued and in that case i may decide to take the money and run! :grinning:
I did this with Nio when the price got to a certain point and got my initial investment out. With hindsight i’ve lost out on further gains but I’m now more relaxed because what’s left in there is purely ‘profits’.

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What I have found works for me:

  • above 15% => above what is considered the historic average of 11% for the entire market performance => I start doing some research. Why is it at 15%? why is it outperforming the market? is it correctly valued or overvalued and therefore might go down at any moment. Are there any big news coming (Christmas, War, Wildfires, Tornadoes, zombie apocalypse) that would disrupt the work of the business and make the price go down
  • above 20% => even more research like S1 filings consider insider buy/sell activity, look at when dividends ex-dates are etc… and usually sell and cash in => this strategy is more for the positions I consider trading and not necessarily holding => momentum stock that can go down at any moment (you never know nowadays especially with so many companies that are not transparent).
  • above between 35-50% => I will 99% sell (at least part of my position) and buy on the next dip
  • below 0 => sell and try to short it via CFDs :upside_down_face: to recover any loss

I highly recommend that you also consider taking a profit now and then and keeping it somewhere else not just the market. You might be inclined to buy Apple or Amazon or Tesla and hope they will make you rich in 30 years but the reality is nothing guarantees the company will not go bankrupt tomorrow. No company is immune. Highly recommend the WSJ The Rise and Fall series in this regard

Curios to see what other people do :thinking:

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@Master-Sharefu Thank you for your reply there mate, appreciated! And thank you for sharing that example with Nio I never considered “splitting the difference” as it were and it’s food for thought for me.

(And cause I’d kick myself if I didn’t ask) Dont mean to be cheeky, but, care to share any valuation tips?!?

@dragosMLT totally appreciate your detailed reply there bud. For me the magic number is 12,5% but that’s a peculiarity to my way of thinking rather than anything else and certainly the point at which my trigger finger wants to cash in.
I must admit it feels like a bit of an anti climax when that happens but there you have it.

I found really interesting your idea about having part of your portfolio parked outside the market and must admit that after a fashion I sort of do this also (my split is between shares, crypto and peer to peer lending).

Any other markets you’ve found interesting?

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Sorry, not really. Except that the current rally seems to be driven by the fact that many analysts upped their target price to $45 after Nio hit a milestone in car sales.
I usually just reinvest the profits in other stocks but i guess taking out and saving some of that income outside of the market is a good idea as well.

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No worries still appreciate your reply and the insight into your process though, thank you

For me, I let my winners run and cut the losers in my portfolio.
Obviously I’ll consider the reasons for the increase/decrease but generally follow this rule which has worked reasonably well.
I need to be a bit more restrained in ploughing more money in to stocks which I’m seeing rise (like increasing my holding of NIO for example which I first bought at $7) as in the past I’ve brought my average up buying more and then seen the SP drop.
Ultimately I think you should sell based on your opinion of a company’s future rather than what percentage you’re up or down.

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My approach is not too dissimilar to that of @dragosMLT

If a stock increased to too highly, I often sell all of it, or most of it. I try then to leave that money in Freetrade and not instantly buy something else. This stops me feeling like a day trader and trying to beat the market.

If I missed selling at an overvalued price, then I missed it and just keep the stop.

I try to look around the 15% mark and my research to see news articles and historic prices to see any indication of a rise that much is often fruitless. This determines if I sell in full. If there’s some news, I will often still sell most but it depends on the type of information I find.

Profit is good, but don’t chase it in the short term. I also live by the mantra of “you only lose money if you sell at a loss” and I try to use that to keep a position unless it’s rising unusually.

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I don’t really skim, but if there is a rapid increase in price I do like to make sure I review the new information and check that I’m comfortable still holding and if the new price is justified.

The exception being the few stocks I will not sell any time soon (GOOGL, DIS), unless there is a material change in their business / moat I’m just going to keep holding them.

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Thanks for your reply mate,

I must admit I could write an encyclopaedia if I told you of all the times I’ve been guilty of not being a bit “more restrained” :rofl::rofl:

Although in fairness unlike your example I actually “plough in” when the momentum is going the other way…

Don’t limit your upside, only the downside. In other words have a pre-decided loss % amount before selling when you buy, let the upside go, theres no point limiting it.

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I got in on SQ at 100 and sold at 130. The valuation got to high in my view but in hindsight I wish I held. It’s approaching 200!

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@jbowen Appreciate this point however I don’t entirely agree with it. And not necessarily only because of covid like events.

Thanks for replying though dude

@J4ipod94 yeah that’s a difficult one I suppose, but on the other hand I think it’s probably better to lose “theoretical” rather than actual gains no?

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The problem with skimming the top is that you are trying to time the market rather than showing conviction in the growth of the company. It might work if you can time things for a stable share price that fluctuates either side of a long term stable price but for a growing share price all you are doing is potentially reducing your rewards.

That might be the right strategy for your personal risk profile but as others have said rather than skimming from the good performers you’re probably better off looking to cut out the poor performers!

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