Sell rules are important for locking in profits and preventing loses. A 3 to 1 profit to lose ratio is a good goal. IBD recommends cutting loses at 7 to 8% when buying from a correct pivot point as a stock breaks out on huge volume. The "rules" shown here are from a presentation by Lee Tanner.
Here's 2 links to the sell rules by Lee Tanner from the Petaluma IBD Meetup Group from June 2017.
PDF Version: PETALUMA_IBD_MEETUP_SELL_RULES.pdf
Sell Rules (Complete List)
- Sell -7% or -8% from buy price. (Cut Loss Sell Rule)
- Take gains +20% to +25% above pivot point, unless within the first 8 weeks. Also See rule #14. (Profit Goal Sell Rule.)
- When profitable 6%-11% use 10%-14.5% decline from the peak “trailing stop” cushion. (Decline from the peak sell rule)
- If -7% straight failure three times stop buying and study. (Three-Strikes Rule)
- You may sell if it plunges below the 50-day on huge volume. (Pierce 50 on huge volume.)
- You probably should sell if it gaps down on huge volume in a scary way. (Big Gap Down on Huge Volume)
- If market corrects you may sell lagging positions to reduce exposure.
- If up ≥ 20% in ≤ 3 weeks hold 8 full weeks. (Certain-teed hold rule)
- Sell only if a written sell rule is triggered.
- Stocks surging up past the sell goal may be held using the 10-day line as a selling guide. (Short tern gain extension)
- If portfolio is down 4% for the week (no margin) to 8% (full margin), sell weak stocks to reduce exposure. Generally sell at least one full position to cut risk.
- May Sell/Probably sell if a breakout on good volume stalls and goes negative within a day or two, especially if on high volume. (Failing Breakout sell rule.)
- Sell all or part of stock if afraid or confused.
- Don’t sell for profit taking for the first 8 weeks. During this time sell only if a protective sell rule is triggered. This is like the 25% profit goal, #2. Hold until you reach 8 weeks, and +25%. In a few cases you might hold a stock for 13 weeks before concluding it is not going to perform. (Time Goal Sell Rule)
- Keep a 3 to 1 profit to loss plan. (Profit-to-Loss Ratio Rule)
- Assess risk and sell if needed before earnings, but hold if possible for the earnings report. (Earnings Release Hold Rule)
- If closes a week up 50% from IP then use big cushion sell rules. (Big cushion sell rules)
- May sell if a breakout did not happen or stalled out, but mostly don’t use this rule unless you are quite sure. (Failed Breakout Sell Rules)
- Generally hold stocks that are going sideways for 13 weeks (one quarter) before dumping it. Stated as sell rule: May sell a stock that has advanced less that 5% in the last 13 weeks.
- Usually sell all of a stock that has a takeover offer.
- May sell if a stock is persistently weak after eight week (40 market days) from the breakout.
- Select a few stocks to hold for longer term, larger gains.
- Plunged significantly (4%-5%) on huge volume (+100% or more).
- Sell if a stock goes into a climax top. If not sure scale out.
The links above (pdf and powerpoint files) have further details on each rule.
10 Day Moving Average Violation Sell Rule
Do not sell when the price low for the day is below the 10 day moving average.
Wait for a subsequent price bar low below the first bar low's violation.
Sell Rules In Order Of Importance (to me anyways)
Defensive
- Sell -7% or -8% from buy price. (Cut Loss Sell Rule)
- You may sell if it plunges below the 50-day on huge volume. (Pierce 50 on huge volume.)
- You probably should sell if it gaps down on huge volume in a scary way. (Big Gap Down on Huge Volume)
- If market corrects you may sell lagging positions to reduce exposure.
Offensive
- Take gains +20% to +25% above pivot point, unless within the first 8 weeks. Also See rule #14. (Profit Goal Sell Rule.)
- If up ≥ 20% in ≤ 3 weeks hold 8 full weeks. (Certain-teed hold rule)