Equities - exit strategies?

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krinpit

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Does anyone have a link to where I can find some info on commonly used exit strategies for equity investments?
 
Some people use ATR (average true range), others use the moving averages(e.g. if price falls below 50 day MA then sell), some just draw a trendline below the lows and sell if the trendline is broken.
They are technical events, maybe there are similar exit strategies for value based investors, I dont know.
 
I would agree with clubman to a certain extent and while I don't know much about technical trading, very numerous studies show it doesn't match value investing in the long term. For trading to beat the long hold (with proper, and simpler fundamental analysis) you have to time the buying and selling of your shares correctly 82% of the time. Only a very small handful of people can do this, if any. So to answer the question, I'd focus on valuation and how prices relate to earnings and prospects

If a company for no apparent reason has fallen out of favour and is oversold despite strong earnings and solid prospects then I'd buy it. Evetnually the market will notice and you'll have gained just by the company being fairly valued. this gives you what's called a margin of safety and means that you are somewhat insulated from temporary fluctuations around fair value. I wouldn't necessarily hold forever though unless the earnings kept growing and prospects remained good. If however the value of the company started to significantly deviate for long periods from the value dictated by earnings I'd cash in. The market will again notice and it will come back down eventually. See the thread on investment books for some very good reads on this topic
 
For trading to beat the long hold (with proper, and simpler fundamental analysis) you have to time the buying and selling of your shares correctly 82% of the time.

Where did this statistic come from? It makes absolutely no sense. You can earn a bucketload of money with a 50% (or less) trade success rate. You'd have to be an absolute genius to get a good entry and get out at the top in 82% of cases - not only would you beat the market, you'd likely be a zillionaire.

Please note I am not arguing that technical trading beats buy and hold. I am saying that the 82% figure is bizarre.

In relation to the OP's question - it's a lot easier to get a good entry than it is to time the exit. If you're trading, then there are a number of workable approaches one can take. If you're index investing for the long term, less so. Clubman's suggestion is probably as good as any.
 
charttrader said:
Please note I am not arguing that technical trading beats buy and hold. I am saying that the 82% figure is bizarre.
Click to expand...

I've read that even the best traders only get 1 in every 3 trades right. I honestly cannot remember where I read that, it may have on Michael Covel's site but I wouldn't swear to it.

Of course the real skill is not in getting the trades right, but in having the necessary discipline to cut your losses short and let your profits run.
 
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