Exit Options Strategies Every Investor Should Know

by Josh Biggs in Marketing on 20th December 2020

Stock Markets aren’t easy to deal with. You need to find the right time to invest and the best time to sell your shares to earn a profit. Selling your stocks is referred to as exit, and it requires strategies to get the best out of the market. You need to identify the best strategy before they disappear that will give you profits and limit your trading losses. This article will discuss some of the exit strategies you can use, and here is the list.

Study the Long Term Cycles

You need to study the trading markets and know when they last ended and the best time to strike. According to tastytrade, “the available vertical spread options and historical data will determine whether you will get superior returns or lost opportunities in your investments”. Through long-term spreads, you will understand interest rate fluctuations, current trends, and the economic cycle, which will give you a clue whether to sell your stocks or continue trading.

Hold Until it’s Time to Sell

You can take a passive approach in your trade, regardless of the environmental, political, or economic conditions keeping an eye on the statistics until you get long-term profits. Most stock indices don’t relate to exposures, meaning you will still get the right time to sell and earn profits. The profitable investments may also need an exit strategy even when you planned to hold them for long. It will help wait for a position that reaches the highest point, then sell your investments, exit the market, and later find another long-term investment opportunity.

Identify correlated markets

Many modern market environments consist of bonds, equities, and currencies. These have rotational strategies in each of the correlated sectors in daily, weekly, or monthly. Having these correlated sectors makes your portfolio have more risks since unrelated positions might be in the same basket, bought, or sold together. Such correlation can destroy annual returns in case an unfortunate event comes along. You can mitigate these risks by performing studies every month or quarterly. The studies involve comparing performances between positions and correlated markets and looking for strength in your groups. If all studies point to the same leadership, it’s time to exit.

Build-Bottom Fishing Skills

As a trader, you don’t average down but upwards. But when things are falling hard and fast, and there might be a risk of them bottoming out, it’s time to take an exit. In case the floor breaks, find an exit plan and execute it. The plan should dispose of the entire position or what’s above the capitulation price to avoid losses.

Watch the Calendar

In financial markets, there are lows and highs of different cycles that run yearly. You need to study the cycles and know when it’s safe to exit. For example, if investing in Tech Company, the tech stocks usually perform well in the early months and worsen as the year ends. With this, you can do your trading from November and exit in April, other than starting in May and ending your trade-in October when the market is low.

You need to conduct market timing and prices to benefit well from the markets. You can notice red flags when conditions change significantly through timing and checking prices, signifying it’s time to exit the market.

Categories: Marketing