I’ve been getting a lot of emails lately asking why I’m so quick to take profits? Answer: because of days like today. I went into today long 3 stocks, (Nasdaq: CTDC), (Nasdaq: ESLR) and (Nasdaq: SWIM). Currently, CTDC and ESLR are each down over $1/share and SWIM is down 15 cents. Surprisingly, my biggest loser today is SWIM.
That’s right, I’m quick to take profits just as I’m quick to take losses. Maybe that&r
squo;s why after being ½ right and ½ wrong on CTDC and ESLR, I’m up nearly $200 between the two. Not so bad after all. How you say? Simple. While I knew there was a risk of ESLR and CTDC tanking big, I also knew that there’d be some pre-market short covering, and that would enable me to get out ahead of any major damage.
You see stocks like these don’t collapse instantaneously, it’s more of a gradual realization that the run is over, at least for the time being. I sold my 200 shares of CTDC at $10 and $9.95 within 2 minutes of pre-market trading ($25ish loss, I can accept that) and had sold my 200 shares of ESLR for a nice gain of $200ish) at $19.40 within the next 5 minutes. Ahh, the beauty of timing. Not usually one of my strong suits, my quick trigger definitely helped me here.
Now, why did I sell so quickly and as it turned out, so perfectly? Simple. CTDC was a pure short squeeze play, if it’d managed to open at 8am anywhere between $10.25 and $10.50, shorts would have panicked and squeezed it up to $11, $12 or maybe even $13. But since there were sellers from the get go, I couldn’t risk any tankage, so I got out as quickly and as best I could. Sure, there were some bids at $10.10 and $10.15 and I could’ve avoided any loss whatsoever, but the $25 loss didn’t and still doesn’t concern me, I was in protection mode, guarding against the nasty $200 to $300 losses (which is what my loss would be right now f I’d held)
With ESLR, I sold out because I was up $1/share, a solid gain, so why risk it? Sure, (Nasdaq: CSUN) was up over $2 when I sold and ESLR could’ve followed suit, but CSUN seemed to have a mind of its own, so the comparison was messy.
And when SWIM tanked to $17.80 in the early morning, I gave up my investor ambitions and sold on the bounce at $17.99, a penny gain from my initial $17.98 entry. Serves me right for entering into such a slow moving stock, I just don’t have the patience and I can’t risk some stupid low volume drop of 50 cents or more, ruining my gains from ESLR and CTDC.
Welcome to my life, I’d love to be something more than just a $1-$2/share scalper, but, as evidenced by today’s trades, I’m pretty good at it mainly because I know how to cut my losses and take my gains quickly. It’s a recipe for success, albeit non-scalable success, aka why teaching others (view my book and DVD) is not only more fulfilling, it’s also more fitting than trying to manage a multi-million dollar hedge fund.
