| Textbook Trading - How to Sell High Volume Stocks Initially Posted: November 26, 2020 1:00 p.m. PST Many take profits in such a way, that they are not only leaving hundreds if not thousands of dollars on the table, but they end up realizing less cash than the seller originally intended to harvest. The result is panic selling, both by the profit-taker, and consequently, many of his fellow sellers. Here is a more advantageous way to sell stock in high volume low price stocks, such as penny stocks. DON’T HIT THE BID While I rarely play penny stocks, never have I ever hit a bid when it was time to sell. It is just dumb and almost always needlessly expensive to the seller. So many make the mistake of bid-whacking when a share price is trending up. Why? If the trend is up, most of the time the buyers will come to the seller. There is no need to go to the buyers. When I decide it is time to take a little off the table, I begin to offer stock a few ticks above the current ask price. Not only do the buyers almost always come to me, but in this way, I do not cheat myself out of money. Bid-Whackers Always Lose First, never assume that you are the only person ready to sell. I always assume that at the time I hit the sell button, at least one other person is also putting in a sell order. So, what happens? Now there is significant size for sale. Two people hitting the bid at the same time, will almost always wipe out that bid. Now, the next bid at a lower price is up. Except maybe that bid, and a bunch of other bids get pulled because the market realizes that there are sellers and “let’s just see how low they’ll go”. Or others see the selling and decide they also better get out before the price tanks. Now we have got a rush to the exits and in the blink of an eye, the share price has degraded. This creates even greater anxiety, and the panic selling begins and before you know it, the stock price is down 10, 15, or 20%. Ah, but the original sellers are still are not out of their stock. It has been my observation that once someone decides to sell, they are determined to get out no matter what. So instead of taking that extra moment or two to let the buyer come to him, that person is now taking substantially less than he originally intended when he put his sell order in. And the selling does not stop until all the nervous Nellie’s cut bait. Never Sell into a Sell-Off I cannot tell you how many times I have heard or read that a trader regrets “selling too soon” which is almost always happens because he sold into the panic created by bid-whacking. THIS IS THE WORST TIME TO SELL! Even if the trend is lower, the share price usually retraces upward after a bid-whacking session. Patience will almost always reward the seller. THE RIGHT WAY TO SELL Be Decisive When you decide to take some off the table, pick your spot and stick to it. Don’t worry about whether you are selling too soon or that the stock looks like it is going higher. FOMO (Fear Of Missing Out) works both ways. People worry about not being in on the party and then they worry about losing an opportunity to sell at the highs. It is impossible to pick out exact lows and exact highs, so set your targets and stick to them. Stair Stepping and Smaller Lots Once you have chosen the price point at which you are going to sell some stock, consider the number of shares, or more importantly the value of the shares you are intending to sell. If you show $100,000 worth of stock at a set price, what do you think is going to happen? It will take an incredible surge to get all that stock taken out, and more likely than not, buyers will sit back and wait for you to come down to them. Furthermore, others who are also ready to sell, will see the huge size being offered and try to beat you to the buyers, by offering stocks at a slightly lower price, encouraging the next guy to offer his at an even lower price and so on. Before you know it, the share price has taken a quick beating. Once I pick my price point, I offer it in lots no great than $10,000 worth and I “stair step” it. For example, let’s say I want to sell $100,000 worth of stock at 5 cents. This translates to 2 million shares. First, I never EVER, show lot sizes great than $10,000. In the case of a 5 cent stock, this means 200,000 share lots. Then I put in my orders well in advance. I do not wait for the stock to hit 5 cents. I probably put in my advance sell orders when the stock is trading at 4 cents. I also straddle the 5 cent target price, like so: Sell 200,000 shares @ $.046 Sell 200,000 shares @ $.047 Sell 200,000 shares @ $.048 Sell 200,000 shares @ $.049 Sell 200,000 shares @ $.05 Sell 200,000 shares @ $.051 Sell 200,000 shares @ $.052 Sell 200,000 shares @ $.053 Sell 200,000 shares @ $.054 Sell 200,000 shares @ $.055 If all these orders execute, then I’ve sold my $100,000 worth or 2 million shares at an average price of $.05 without bid-whacking or being subjected to bid whackers. Now it is possible that not all of the trades will execute at the high end, but almost always, I will sell my stock at a better average price than if I would had taken part in a bid-whacking party. No Regrets Once you have made your decision, live with it. Maybe you bought too high. Maybe you sold too soon. Thinking about “what could have been” or “what I should have done” will not accomplish anything except maybe for a stomachache. Did you buy it is an investment or to flip? If you bought the stock to flip, then I don't care. This piece is not about flipping, and flipping is a losing game for most traders, so if you intended to flip and you bought too high, then good on you. If you bought the stock as an investment and you could have bought at lower prices afterwards, then either buy some more and average down or preferrably, just forget about it and wait it out. I say "preferrably" because I believe in averaging up, not down. But that's up to you. Same goes for selling too soon. You set your price, you sold at your price, so you should be thrilled. You met your goal. Enjoy it. Always remember, nobody in the history of this planet ever went broke by not being greedy. DON’T BE PREDICTABLE The worst mistake anybody can make is doing what everyone else expects most will do. By way of example, let us look at what I would confidently call currently the most popular penny stock on the OTC (no names). Here is the chart of Wednesday’s trading:  Now most knew that those traders that are not truly investors, but are rather looking to make a quick buck, were going to head for the exits ahead of the Thanksgiving holiday 4 day-ish weekend. A lot of them left a lot of money on the table by trying to figure out where the exact high of the day would be. I, myself figured that it would be just above 5 cents, and I was correct, except for the fact that the resistance I expected at 5 cents was not really there. The share price blew by 5 cents, and I told those close to me that trouble was brewing. It was obvious. That’s because most traders are just that transparent. You see, I figured that a lot of people had a 5 cent goal ahead of the long weekend. But where they blew it, was when they got greedy. Had those traders stuck to their 5 cent goal, they would have got their price, and the stock would have closed higher than it did. But what actually happened is that the some selling came out when the stock hit its high of the day, and everybody who really wanted 5 cents joined in on the selling all at once. The bids disappeared and then there was panic to take what they could get. And that’s how you get the close that was 21% below the high of the day set just 100 minutes earlier. If it was me, I would have used the stair stepping method I described earlier and offered lots starting @ $.046 (shown in blue) probably when the share price was still in the 3s or low 4s. True, the share price may never have reached the price where I would have sold my last lots, but then the average price that I would have received would still be higher than the closing prices, and the total cashed in would have been higher, while maybe maintaining some of my position that I had intended to sell. Certainly, I would have ended up in a better place than those that ended up selling their stock below $.045. Who do you think did better? The traders that would have followed the stair-stepped blue marks, or those who sold into the high volume, circled in red? IF YOU’RE WRONG, YOU’RE WRONG Stick to Your Guns There is not a plan in the world that will work out perfectly every time when it comes to trading stocks. But what is guaranteed is that you will get less money if you panic sell rather than stick to your plan. Revaluate Rather Than Panic If your plan did not work out, don’t panic. Firstly, you should never put money int the stock market that you must absolutely have to feed your children or pay rent. If you can’t afford to lose, then don’t. Make a new plan and stick to it. If your plan is long term, don’t watch the trading. It will want to make you barf. Go earn a living, play golf, read to your kids, or take a nap. Then check your investments at the end of the day. Maybe your advance trades will have been executed. Maybe your portfolio will have gone up in value. Maybe not. But don’t ever panic, because more often than not, panic will cause you to make a wrong decision. ~ George |