Exit Strategies For Momentum Stocks

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Over the last 16 months, most stock markets have declined over 50%, and some individual companies have been wiped out completely. The effect on many individual portfolios has been devastating.

So, how does an investor or trader know when to sell? Well, my perspective is from someone who focuses primarily on price and volume, rather than the fundamentals of the underlying business. Admittedly, I've owned some shares that have fallen a bit. I intended to hold them as very long term investments, but it has been quite painful to watch them decline to current levels. This market has clearly demonstrated that the buy and hold strategy can devastate your portfolio if you do not use a form of protection, such as options, stock index futures, and shorting strategies.

Now, back to the question of when to sell. However, some hedge funds and Commodity Trading Advisors actually made a lot of money in 2008. Some made big bets on a collapsing credit market and shorted the financial stocks. Traders that I am more familiar with, have had significant success in trading in the commodity and currency markets. Their strategies will be the focus of this article.