Quick Lesson - When to take profit

I remember for one of my trade, UTAC, before the mid 2006 correction, it was priced at $1.10, and i bought it at $0.80 cents. Thats a 27% rise. It has already hit my target at $1.00. Being greedy, i didn't want to sell it.

Over the next few weeks, I saw the price fall back to $1.00. I didn't want to see my 27% profits turn into something smaller. Than in no time, it was back to $0.80, and finally below my buy point. I was stupid into thinking I wanted to keep it for a long term. It never moved for the next 6 months, and still isn't. Luckily i sold it at $0.79. Why would i said lucky? Well, i guess i've placed the money somewhere else, and I've profit much more from it!

Anyway, what the lesson to be learnt from here. Although you might have chosen a good stock, its a good reason to think you can keep it for 5 years and expect the stock to rise with its actual quarterly profits. The market might be shrinking in the total money supply. Investors might just not be interested in the stock.

Through my experience of seeing unrealized profits become realized losses, I've learnt some important lessons.

1. Set a target price. Usually, for good companies, a 30-40% price appreciation would be a good price target.

2. When the stock price reach the target, you can re-evaluate the situation, and consider setting another target, for selling.

3. Never let your profits fall below 7% of its current high. You may want to look at my Food Empire buy and sell. (For eg. you bought a share for $0.7 and it rises to $1. Once the price drops to $0.93, sell.)

4. If your stock rises past your target in less than 8 weeks, keep it for the whole 8 weeks, provided the previous conditions have not been met.

Thats the basic rules for you to follow. If you follow that rule, you will never see your profits fall to a loss, like I did. So what if you sold too early (ie the stock continued its ascend after that), don't worry about. You now have 30-40% more to spend on your next great stock.

Tune in next time. I'll talk about tell tales sign to take profits, from the charts.