Page 1154 - How to Make Money in Stocks Trilogy

Selling Checklist 139

Take Your Profits—and Cut Your Losses—Even Sooner in a Weak Market
The basic selling game plan says you should:
• Take most profits at 20%–25%
• Cut all losses at no more than 7%–8%
But you can—and should—adjust that in a weak market. As a rule of thumb, keep
the 3-to-1 Profit-to-Loss Ratio we discussed in “Offensive Selling.”
For example, you could take your profits at 10%–15% and cut any losses at no
more than 3%–5%. It’s just like slowing down and driving more cautiously in heavy
fog: The normal speed limit may be 65 mph, but do you drive that fast when you can’t
see the road?
So always adjust your game plan based on current market conditions. That’s how
you arrive safely at your destination.

3 Tips on How to Handle a Market Correction
By the time the outlook in the Market Pulse changes from “Confirmed
uptrend” to “Uptrend under pressure” to “Market in correction,” you’ve
probably already sold at least some of your positions. Either you hit your tar-
get profit goals and locked them in, or your stocks triggered sell rules found
in the Selling Checklist.
But keep in mind: You do not have to automatically sell all your stocks
when the market is in a correction. If you have a large gain in a particularly
strong leader that is holding up relatively well, you may choose to sit tight.
(Note: Holding some stocks is fine, but if you’re still fully invested during
a market correction, you probably need to take a closer look at your portfo-
lio. Make sure you’re properly following the selling game plan and taking
heed of the 8 “secrets” we discussed earlier.)
Here are 3 proven ways to stay safe in a market downturn—and get ready
to make more money in the next uptrend.
1. Don’t make new buys.

You now know that most stocks move down when the market is in a cor-
rection, so why risk it? Wait for a new uptrend to begin before making
any new purchases.
2. Protect yourself.
Remember your primary goal: Make money in an uptrend—and safe-
guard those gains when the market weakens.