For new investors, seeing a particular stock in ‘red’ since you bought it, makes you pause a bit. Imagine you’re only 1 month in the Philippine Stock Market, you are a greenhorn through and through, and all the time of your still short stay in the PSE, the stock you are holding is always ‘red’ on your port.
Makes you pause, and think. True? Hehe
LOCK IN PROFITS (LIP)
I have discussed the case of my EDC stock position previously on a post entitled ‘Cutting Loss of Averaging Down”. I declared therein the following..
Well, I didn’t execute my original trading plan for this particular stock. What I did is Average Down, until last June 22 my average price for EDC was at P5.46, a good enough position to trade and lock in profits nung lumipad ang stock na to.
What is Lock in Profits?
Based on the Investopedia definition ‘Lock In Profits’ means realizing the gains of a position, such as buying a stock, and then by exiting at a profit. By locking in, that portion of the investment is no longer exposed to risks. All profits are unrealized until the position is closed. Also known as “realization.”
When Averaging Down Works
Why I made this move instead of cutting loss or just ‘hold and wait’? I reminded myself of why I bought this stock in the first place, and that is mainly of its good fundamentals. EDC is a Bluechip, time-tested, matatag na!.
These were my additional buys to average down on price, I keep records in an excel sheet so I know where the stock stand at a snapshot, and so I am guided too when I plan to sell.
- 1st buy was May 12 @1800 shares
- 2nd buy was May 19 @500 shares
- 3rd buy was May 31 @800 shares
- 4th buy was June 10 @2000 shares
- 5th buy was June 14 @3000 shares
- 6th buy was June 20 @2,400 shares
Track Stocks in Excel
**Effective Buy Price per share = Net Buy Price (already less broker commission, PSE fee, etc).
**Effective Sell Price per share = Net Selling Price (already less broker commission, Sales Tax, PSE fee, etc).
So from the original average price of 5.94, I was down to average price of 5.46 for EDC with 13,500 total shares coming into the trading day of June 22.
The day before, the news broke-out of Gina Lopez being offered the DENR Secretary position by President Rodrigo Duterte, and her subsequent acceptance.
The morning of June 22, 2016 (yesterday) Gina Lopez related stocks were flying! From FGEN, LPZ, ABS-CBN, and EDC too!!!
I saw a perfect opportunity to lock in profits and I did. I sold more than half of my EDC shares at 5.74. The effective sell price per share was at 5.69.
How much did I earned as profit from the trade? Php 3,000++
Am I happy? Yes! A gain is a gain! Especially considering there was a time I was mulling to sell EDC at a loss. 🙂
*I still have some EDC stocks remaining, for now I will wait, gauge market sentiment, check charts. This time with Gina Lopez at the helm of the DENR, EDC could continue to fly high.
In other news, mining stocks took a heavy beating across the board; ‘Gina Lopez’ news rammed down the prices of mining stocks. The day before I test buy Philex Mining (PX) at 9.02, the day after June 22, my PX shares was at paper loss of 21.44%. Mining stock could continue its price drop for the 3rd day, due to market sentiment based on ‘fear‘. Or it could stabilize. 🙂
Such is the stock market. No one can predict with 100% accuracy what the future stock price or movement will be. But what we can do is to position ourselves to catch potential trades before it happens. How? By learning more about market indicators, watching out for patterns, improving our technical analysis skills, developing stock market acumen, etc. This way, we as newbie traders, stock market beginners can have at least a fighting chance of surviving and winning in stocks.
The best to us all stock market warriors! To more learning, and profits! Yes? 🙂
LIKE and SHARE