When to Sell

Posted by Tyler Bollhorn - StockScores.com

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Ed Note: Tyler Bollhorn gave superb insights into how to trade in the Money Talks in the Money Talks Super Summit last weekend available by video HERE.:


When to Sell

Stockscores.com Perspectives for the week beginning Nov 2nd, 2009


Knowing when to sell is one of the four things that you need to master if you are to trade the market successfully. Selling is challenging because we get wrapped up in the emotions of taking a loss or not maximizing our profit. Ultimately, it is fear and greed working against us to hurt our trading performance.

Having a succinct set of rules and processes is a big help for any decision that can be affected by emotion. Everyone should establish their rules for entry, risk management and exit as part of their trading plan. Here are some things to consider to help with the exit decision.

First, we need to understand what trend lines, support, resistance, price volatility and trigger candles are. These are each relatively simple concepts of technical analysis which help to provide the signals to exit a trade.

A trend line defines the general movement of the market over time. An upward trend is in place when the bottoms are rising from left to right. These bottoms are the points where price stops going down and starts going up, I often refer to these as inflection points. By drawing a line across the inflection point lows, you can define the upward trend line.

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Support and resistance are similar in concept to trend lines; they act as floors and ceilings on price movement. Support is a floor that the market has established over time, it is a low point that demonstrates the minimum investors are willing to accept for the current fundamentals of the company.

Resistance is the opposite, it is a ceiling price which demonstrates the maximum amount investors are willing to pay for the fundamentals over time.

How much price changes over time defines the price volatility for the stock. The more price volatility, the more uncertainty investors have about the value of the company’s fundamentals. Investors are confident about the stock’s price when a stock is trading with very narrow price volatility. So, a stock breaking from low price volatility is an indication that there is new information that justifies the change in price.

Finally, trigger candles are something that I have defined in the StockSchool course material. They are candles whose range are taller than most of the candles before it. These candles represent a period of time when the buyer or sellers were motivated to push price beyond its normal range. Trigger candles occur on days when the market has a strong opinion.

So, how do we use these tools to tell us when to sell? Here are some rules for buying, you can reverse them for short selling:

– Plan to take a loss on a stock if its price falls and closes below the support price established before the entry signal.
– Upward trends take time to develop which means we have to be patient with stocks early in their upward trend. I find it is best to not look for an exit signal (unless you are getting stopped out at a loss) until the stock has doubled its risk amount. The risk amount is the difference between the entry price and the stop loss price.
– Once the stock is in an upward trend and has doubled its risk amount, exit the trade if an orderly, linear upward trend line is broken.
– If the stock runs far above its upward trend line, the market has become emotional and a pull back to the trend line is likely. To protect profits in this situation, plan to exit if the stock closes below the low of the last green trigger candle.
– A new rule that I am giving some consideration to now is to use a more aggressive exit strategy if the overall market is showing signs of abnormal selling. Since the overall market can drag even the strongest of stocks lower, it is a good idea to dance close to the exit door when the market is suffering a break down.

While these rules are quite simple, they do require some practice to see effectively. I expand upon these rules in the Exit Signals video available in the Online Video Training area of Stockscores.com.


The market has broken some support levels and is showing signs that it may go lower from here. With that in mind, I applied the Reversal of Fortune Strategy this week to find some stocks that have good potential to go lower. You can trade these stocks by going short or considering Put options which will gain in value as prices fall.

I would watch for a confirming entry signal on the intraday, 15 minute charts for all these trade ideas as there is a chance that the market will bounce back early next week, although it is not the probable outcome.


1. WIT

WIT broke its upward trend line on Friday with strong volume, indicating the sellers are finally motivated to take some money out of this stock. Resistance at $19.25.


2. XLK

Play weakness in the overall technology sector with a short on the XLK ETF which is breaking down from a rising wedge pattern. Resistance at $21.25



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Tyler Bollhorn started trading the stock market with $3,000 in capital, some borrowed from his credit card, when he was just 19 years old. As he worked through the Business program at the University of Calgary, he constantly followed the market and traded stocks. Upon graduation, he could not shake his addiction to the market, and so he continued to trade and study the market by day, while working as a DJ at night. From his 600 square foot basement suite that he shared with his brother, Mr. Bollhorn pursued his dream of making his living buying and selling stocks.

Slowly, he began to learn how the market works, and more importantly, how to consistently make money from it. He realized that the stock market is not fair, and that a small group of people make most of the money while the general public suffers. Eventually, he found some of the key ingredients to success, and turned $30,000 in to half a million dollars in only 3 months. His career as a stock trader had finally flourished.

Much of Mr Bollhorn’s work was pioneering, so he had to create his own tools to identify opportunities. With a vision of making the research process simpler and more effective, he created the Stockscores Approach to trading, and partnered with Stockgroup in the creation of the Stockscores.com web site. He found that he enjoyed teaching others how the market works almost as much as trading it, and he has since taught hundreds of traders how to apply the Stockscores Approach to the market.

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This is not an investment advisory, and should not be used to make investment decisions. Information in Stockscores Perspectives is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. The writers and editors of Perspectives may have positions in the stocks discussed above and may trade in the stocks mentioned. Don’t consider buying or selling any stock without conducting your own due diligence.