So I don’t really know of a magic formula for when to sell (cash out), but here are a few anecdotes and ideas to consider that have worked for me – both in the stock market and at the blackjack table.
Counting cards might work, playing the right table helps…. In blackjack you don’t win the game, you just have to win more hands than lose and bet bigger on winning hands than losing hands. If you were able to play enough hands and you play perfectly, your odds will approach pretty close to 50/50 win-lose against the house over time. But you would lose a fortune trying. The only way to win is to bet correctly and big when appropriate and cash out when you are up.
So, by my (good and lucky) many years of experience, the only bona fide way to win is to bet big and sell or cash out when you are up – even if you think it might too early.
How many times is your story, “I was up $50,000″ only to hang on till it was gone, and you had to quit the game because you had no more money – kind of implying that you “broke even” when you actually lost all the money you put in…?
You got to know when to hold ’em, know when to fold ’em,
Know when to walk away and know when to run.
You never count your money when you’re sittin’ at the table.
There’ll be time enough for countin’ when the dealin’s done.
Ev’ry gambler knows that the secret to survivin’
Is knowin’ what to throw away and knowing what to keep.
‘Cause ev’ry hand’s a winner and ev’ry hand’s a loser,
And the best that you can hope for is to die in your sleep.
– The Gambler, Kenny Rogers
- Even with a stock that is having some success – if it levels out and starts drifting lower AND they are running low on cash, consider selling (before they run out of gas) and buying back when they raise more cash. Financings are often done at a discount, are dilutive (weakens stock) and as said, needed in order to drill and get results. If they are not able to refill their fuel tank, and suffer engine stall, they will drop further, faster and you will have done good by selling beforehand.
- “Buy on rumour, sell on news” is an old one, but works!
- Sell (at least some) on an upswing when the stock surpasses your original target which takes discipline as you tend to re-fall in love with a stock as it goes higher… and,
- To assuage that anxiety of selling too soon, buy something tangible (and superfluous) with some of the proceeds of the sale. “if this stock doubles, I’d love to buy that ’57 Gibson” – if it does, do it! (plus, you can play a nice guitar for coins when you are broke)
- Sell if the company’s original theory is not working (not forgetting though that companies rarely hit on first hole, Hemlo was the 70th hole…)
- Sell if your original theory is not working (need to sell, win or lose by certain date etc..)
- Watch for warrant exercise (price, deadlines) there is often a promotional push before expiry to get the stock in-to-the-money so they get exercised. Also be warned, by the same token, nearly all investors with warrants sell their stock in order to pay for the warrant exercise.
- Sell on volume days – either way, up tick or down tick, if there is a lot of selling, there are a lot of buyers and vice versa (needs to be otherwise it won’t trade)
- Utilize a seasoned junior mining stockbroker, someone who might have insight as to the brokers involved, selling habits etc. Bonus, these brokers also have a trap line to private placements that regular investors may not see.
- Stocks climb and fall in fits and starts, peaking on discovery and often level off until another as good or better hole confirms the discovery then levels off until other good holes delineate potential size and grade and may really level off as a resource is being calculated until someone buys them out. And, conversely, crater hard on bad news. Sell on spikes up, even if it might eventually go higher over time.
- Choose your timing – triple your money in a month can be better than 5x in 2 years due to opportunity cost
Cash in if you are in the money. It isn’t a win until you sell!