We have been recommending stocks to our readers and took it for granted that everyone who bought and sold stocks had some kind of strategy they implement in order to get the best return on their investments. However, today we receive an email from a young lady who stated that she brought Ocugen (OCGN) after we recommended it and her story made it clear that our trading strategy could help others.
The young lady bought 100 share of the stock at $4.53, then kept all her shares as the stock rose to a high of $18.77, the stock is now back down to $10.94 and she is still holding on to all her shares. So what if the stock keeps going back to below her purchase price and she is still holding on to her share? That would mean she would be holding to a stock in which she is losing money but at one point she had more than quadrupled her money.
The truth is, you cannot hold on to a stock forever, that is just not smart investing. Even if you believe in a company with all your heart, at some point as the stock ascents, you have to take some profit off the table. If the young lady bought Ocugen stock for a child and just wanted the stock to sit in a portfolio until the child was 18 then it would make sense, however, she is investing for herself to make money now.
Now one strategy does not fit all, everyone needs to look at their individual situation. A good rule of thumb, however, is that if your stock has doubled you should start looking at taking some profits. It does not mean that you have to sell the stock but you should at least put in a stop loss order. A stop loss limits the amount loss you are willing to take. So if you bought s stock at $5 and it runs up to $10, you can out in a stop loss for maybe $8. What this is saying essentially is that, if the stock starts to go down then sell it when it reaches $8. This would prevent you from losing all your profit should the stock retreat to the price you bought it at or even lower.
Along with the stop loss, traders should also utilize the limit orders. If the young lady that bought Ocugen at $4.53 just wanted to double her money and get out of the stock, she could have set a limit order to sell the stock at $9.06. This would mean that the moment the stock doubled, her order would be triggered her shares would be sold and her gains locked in. Of course that means, she would have missed the run up that the stock did all the way to $18.77 but no one can time the market perfectly. If anyone was able to time the market perfectly without inside information that person would be a guaranteed billionaire.
The truth is, we will never know how to time the market, however, with a good strategy, great research and making the stop and limit orders your friends, you can get excellent returns in the stock market. HAPPY TRADING!
What is your trading strategy?