3 Easy to Implement Stock Market Exit Timing Strategies

Traders across the world would agree that ‘market timing and staying in the market’ both are important in their own way. Studying the market to determine the right and almost perfect time to exit is important. Most investors and traders keep waiting and holding on to stocks thinking that the market will appreciate. Speculation may lead to profit or may also lead to loss. Hence, it is important that one strategically exits a particular stock, even the market wide position. times the market while exiting from the stocks.

Many investors give in to greed when they see the stock rising. If a stock rises from 10 to 20, investors want to hold on to the same thinking that this might be the very stock that would hit the jack pot and keep on increasing. Little do they realize that just as the stock is increasing, it can also go down. At that point of time they might not even recover their initial cost price .For a broker, it is important to make investors understand that each one of them has a risk appetite that one should abide by and not give into temptation.

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Here are a few important tools or methods that can be adopted by traders to time the market.

 

Value Based Stock Exit Plan

 

In this case, at the time of investing in stocks, the traders should analyze the risk appetite of the investor and decide what value would be right for the investor to exit at. Once the value of stock is determined, it should be adhered to no matter what. A lot of management accounting tools likes Price Earning Ratio. Price Sales Ratio and Price Book Ratio are used to calculate the exact value at which the investor should exit. Whenever, the stock reaches the pre determined value, the stocks would be sold.

 

Opportunity Cost Based Switching

 

Under this approach, the investor takes a decision based on the opportunity cost that may arise from time to time. If he sees, that by selling the stock he can avail of a better opportunity then he would opt for that. The idea is to avail the best available options in the market. If that means, that one has to sell their existing stock, then so be it.

 

Bottom Line Based Selling Strategy

 

This approach of timing the market and determining the perfect time to exit is based on the fact, which not all stocks appreciate. Stocks may dip in value too. As an investor, one would be comfortable to bear a certain amount of loss. This amount of loss needs to be calculated and adhered to. Once the stock reaches that bottom level, one should exit from it.

 

As a trader, one should use all these methods together to determine the perfect time to exit the market.

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