Price Movements and How You Can Use Them
Why price gains “already” should be taken at +20%, some readers want to know again and again. Many strong stocks would still rise (of course in hindsight).
I agree with you, in the current environment many values, even in a single wave, often increase significantly more than + 20%.
However, these five main reasons speak for my proven +20% strategy:
1. You cut the safest + 20% profit out of a rise in price
Many growth stocks jump upwards by + 20% in a swing wave, ie within a few weeks.
On top of that, with every percentage point, more stocks run out of steam, followed by an interim correction that often yields half of the gains or even more.
Therefore, it makes sense to cut out only the safest part of the rise after a chart break and then take another chance with start advantage through a new “outbreak turbo”.
2. Rising profit targets also increase the risks
With higher profit targets, you would also have to allow for greater variability from the point of view of risk and opportunity, otherwise otherwise too many stocks would be stopped out in sideways markets.
Of course this means more overall risk through more stops and longer holding times.
With +20% profit target and 10% stop you have a perfect chance-risk combination.
3. You secure your profits on optimal chart brands
If you bet on a new stock after a successful trade, then secure it at -10% per stop. So also a part of the profits from the last trade is secured. Of course you could also work with a long-term investment with a dynamic stop (= trailing stop).
But: If the trailing stop is not far enough, you will almost always be stopped out with intermediate corrections.
The recommended breakpoints, on the other hand, are only undercut by 10%, if they are real outbreaks.
In all other cases a chart support forms at this point. This optimal stop placement contributes to your overall benefit.
4. You buy the advantage and sell hope
You have a strong advantage to achieve above-average profits. This consists in the extremely selective selection according to strong growth data and chart criteria.
So you buy at an advantage (ie within 5% of the optimal buy point) and then sell at +20% profit to investors who hope for even higher increases despite the price increases.
These buyers tend to act more like gamblers in the casino.
If a stock has already risen by more than +20% within a short time without consolidation, the risk of a setback increases considerably.
They, on the other hand, are the bank in the casino who is making steady profits and selling “profit hopes”.
5. You have a proven, simple and highly profitable investment system
If you take profits in general at +20% and limit your risk to 10%, then you have a proven, simple yet highly profitable investment system.
Other investors without a clear plan sooner or later, usually in turbulent stock market phases, are led to emotional mistakes.
However, you can enter the profit limit and stop at many online brokers right at the start.
You then no longer have to worry about mistakes when it comes to taking profits or pulling the rip cord when making corrections.