Here’s how to record profits on your stock trades like a PRO – explained with real-time stock trading using our WIBE 3V strategy!
Trading and investing are close to each other, except that the period of holding an investment vehicle varies.
Investment — People hold their assets for a relatively long period of time (years to decades) — Stay invested.
Trading – People hold their assets for a relatively shorter period of time (a few hours to a few weeks/months) – after that they exit the investment vehicle with a profit or a loss!
When it comes to trading, it is essential to book profits when the assets reach a predetermined profit percentage (or) according to the strategy (or) to exit the trade at a loss when it reaches a stop loss.
Here’s a real-time scenario where we’ve taken profits on one of our recent stock picks based on the WIBE 3V strategy.
Stock Symbol: NSE:MRPL
Company: Mangalore Refinery & Petrochemical Ltd
Purchase date: May 31, 2022
Purchase price: INR 80.9
The stock has gained around 57% from its purchase price of INR 80.9
According to WIBE 3V strategythe stock was BUY on April 5, 2022. Users of the WIBE 3V strategy would have amassed a huge profit on this trade of 120% in 45 days.
How to book profits like a pro?
Given that the stock is up 57% from the purchase price of INR 81, making a profit is essential. Traders generally use the risk-reward ratio (RRR); once the target is reached, the position is closed. However, the risk/reward ratio may not be valid for all trading strategies; for example, simple trend following or innovation WIBE 3V strategy may not follow a risk-reward ratio. Traders will continue to hold positions until a SELL signal occurs.
Traders can record profits in three ways:
- Sell part of their positions for profit and readjust to the original allocation
- Sell part of their positions when a particular profit percentage is reached
- Adjust stop loss based on stock price movements
In this blog, let me explain the first method by which traders can record profits on their existing stock positions.
Booking Benefits — Method 1:
Let’s say the original investment value on the position (MRPL) is one lakh (INR 1,00,000). The investment has increased by 57% and hence the notional value (unrealized value) of the position is one lakh and fifty seven thousand (INR 1,57,000). The stock was bought at INR 80.9; you have 1236 shares of MRPL.
One of the simplest methods of accounting for profits is to sell certain shares for a value equivalent to the gains realized. In this case, the total notional profit is around INR 48,331. Traders can sell around 403 shares of MRPL at INR 120 to earn profits of INR 48,360 (neglected taxes).
Thanks to this, traders remain assured that theoretical profits are converted into real gains, so that real money is back in their trading account. Traders can continue riding the position until the WIBE 3V strategy emits the signal “SELL”. In the above case, out of 1236 shares, traders would have profited by selling 403 shares and would continue to ride the position with 833 shares.
I hope this has been helpful to you and please exercise your due diligence if or when placing or investing. All ideas expressed here are my own and do not represent trading or investment advice.
Disclaimer: This is not a buy/sell recommendation and is shared for information and knowledge only. The author is not a professional (or) qualified investor, and the articles of association are not investment advice, stock recommendations or advice of any kind. All analytics/data are from the public domain, such as, but not limited to, Yahoo Finance, Google Finance and Investing.com.
Consult your financial planner for any investment decision. This item is not paid promotion, and expression in this article is solely the author’s research and analysis. While anyone can give a “BUY” recommendation on a stock, investors need to have a strategy and know when to “SELL” a position. Do your due diligence, and all is At your peril. All the stories I write are all originally published on WIBE
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