Investors put a lot of energy in the timely boarding in the market. A good exit strategy, however, is at least as important. Read here how this works can go.

ETF Strategies

Investors are taking mostly diligently a position, but often do not know well when they have to close the position. The market timing is difficult, if not nearly impossible. But who measures some, retains its profit or limits the losses. Two types of exit strategies are in swang among private investors. The first states that they have to let go and take the profit on gut feeling to sell, with the danger that profits turn into losses. The other recommends to take the profit or pain at a predetermined price or profit purpose. One approach is not necessarily better than the other; both can be effective and even be combined, but also each have advantages and disadvantages.

ETF Sales strategy 1: never mind blowHow to take profits or reduce losses with ETF Strategies

This strategy for many investors is a synonym for a lack of an exit plan. The rates are developing well, so never mind. When a nice profit is reached or the profit potential is likely to evaporate, the sellbutton is pressed. But if results falter or colors blood red, investors often know will no more. How should I risk the loss amount? All too often parked out of sight quite a loss-making investment in better times to view exhibition once again. Also who according to this methodology rules and limits should invest that help to define financial goals and risk tolerance. A good selling point may be that if all the reasons to buy the investment disappeared it is time to get rid of this view.

ETF Sales strategy 2: formulate Profit targets

The gain or loss is now taken as soon as the investment either touches a certain rate level that is formulated for the time of boarding. The art is to not have any dreams but reasonable profit to formulate goals, based on achievable results. Historical quotes can give an indication of such reasonable goals.

Private investors make far more often losses by mistakes than professional investors. Specific sales orders should be executed as a stop loss order for such horror scenarios. That is an order that automatically runs when a specific rate, the stop price is reached. A sales order with a stop price of 11 euros, goes public as market order (or in the case of stop limit order as limit order with a lower limit) when the price reaches the level of 11 euros. In determining the traffic rate, investors can, for example, be guided by the rule that they are not more than 1% of their invested assets want to risk. Who has invested 20,000 euro, so 200 euros per transaction. As an ETF costs 20 euros and an investor places a stop loss order for 100 euro then the lowest stop rate 18 euros. If that rate is achieved is indeed an investor so at most 200 euros.

ETF Sales strategy 3: dual strategy

With a trail stop order, investors can combine strategies outing above. With this type of order a variable rate of is the stop rate. If that condition is reached, the order at any price or with limit will be sent to the stock exchange. This type of order makes investors more flexible in their profit-taking and risk management.


How to take profits (or reduce losses) with ETF Strategies
Tagged on: