Today we are going to be talking about the exact point to sell a stock when trading within the stock market. This is really important because a lot of folks play this little game where they buy the stock. Here, they watch the price go up, they're like, oh, and then they sell here I Guess they are mesmerized by the price strength so they miss all the signs of the reversal and then of course they go and rationalize it to themselves. Oh I guess I Just didn't want to make money today.

No, you just employed a stupid strategy. So with that in mind, my goal with this video is to tell you the exact point at which you should sell a stock. Rather, there are two exact points point at which you sell a stock depends on the type of position that you're holding. By the end of this video, you will have two strategies that you can immediately put into practice.

and as always, the only thing I ask of you. The only thing is that you hit that beautiful and ravishing like button. And if you see value in the following video, don't forget to subscribe for more short, sweet and simplified videos on how to trade the stock market. So let me just start by answering the question of this video.

There's two different areas that we sell out based on two different types of positions. For undervalued positions, we sell out at validation. We already know that we buy in at confirmation confirmation that we do have an uptrend. so it makes sense that we would sell out of a position at validation, Validation of a downtrend.

Validation is the point in time where you have the highest probability of the stock turning against you on average. So it makes sense that we would sell out at validation, buy in at confirmation, and sell out at validation. This is our strategy when it comes to positions that are undervalued. But if a position is overvalued or it's overextended, we watch for the closing gap of real estate between the SMA line and the price action we sell out at the crossing over the SMA line.

Now I'm going to be walking you through this, but hear out my introduction first. So this video is frankly an attack on the holding and hoping strategy that so many people employ. This is the strategy of people buying into a stock with the intention of short term trading it, and then regardless of what the stock does, they just sort of randomly hold it until some unspecified point in the future where they feel like selling. But moreover, this is just an all-around very stupid strategy.

There's no foresight, there's no planning, and it's really just laziness Because there's concrete signs and concrete points at which you should be selling. So the one decide use. We have to look at the Givens right? So the given is that we know that a position any position that take may or may not deal in our favor. So we need to have a concrete point, a concrete plan in place regardless of whether it does or doesn't go in our favor.

So if you understand this, I highly recommend comment even be following below in the comment section: Charlie Holding and hoping is stupid I won't do it. And honestly, there's something very magical about typing it out because it starts the learning process in your mind. I Promise you there is value in typing it out, rereading it, and then posting it. That's something that you're going to remember doing, especially if you don't regularly post comments.

and it also helps me know that I'm not pointing you in the wrong direction. Okay, so with that being said, there's two approaches that I utilized when figuring out where to sell a stock. and these are the two that I talked about in the beginning of the video and I encourage you to use both of these on a paper trading platform just so that you know exactly how to do it and to see if it provides value to you. So the first approach is through validation points.

So if you are in a position and you've identified a lot of room to run, then it makes sense to focus on the validation approach because you don't need an extra margin of error. and if you employ an expert margin of error, you're going to act yourself out of a lot of trades. But if you are in a position that is overextended, then it makes sense to focus on the early warning signs approach. This is because what's an overextended position? there's much less of a margin of error and thus sustained.

Early warning signs should be paid closer attention to. So the more overextended a position is, the easier it is for it to quickly wipe out your gains or turn against you. And thus, early warning signs are going to carry more weight with overextended positions. Now I'm going to give a bunch of examples of this.

so if you're lost for whatever reason, don't worry. I'm gonna give a lot of examples, but when choosing between the two, your choice of selling off points should be based on your analysis of the stock, your plan beforehand, and most importantly, your risk tolerance level. We'll talk about how to figure out which category of stock falls into and which one to use based on different examples. after.

I introduce the two. So let's go ahead and start with validation points. So this is an extremely useful tool for it. Balancing your risk of loss with your risk of losing out on opportunities of course.

One of the biggest things and the biggest problems that we have is that if we're too conservative, we're gonna end up selling out of all the winning positions not only to losing ones, but also the winning positions. And if we're too aggressive, we're going to end up losing money on all the really bad positions. So the validation point is the point. After you have already had early warning signs of a downtrend, this is the point that a downtrend is validated.

it's validated with the first candlestick holding below the validation line. Now I'll explain at the end of the video how to set up the validation line, but it is basically a more reactive version of our current SMA line. It's called the validation line because it validates the fact that now is time to sell out of your position. But anyway, selling out at validation points is also a favorite amongst many traders as it's both easy to implement and allows them to protect their capital in undervalued positions while not forcing themselves out of every trade.

So the reason that we sell out at validation points is because at that point the stock is an all statistical probability. Now I'm more likely to turn against us than it is to continue rising. Now, that doesn't mean it will turn against us, but it will turn against us enough times for it to make sense to use the strategy. in the long run.

That means in one individual trade you might be planted to safe, but over the long run, it's better to minimize your risk because even if you have a 20% probability of something winning, you know you might win the first time, right? But over the long run you're not gonna win the majority of the time. so it's important to have a specific point that has the highest probability of success. Now, the reasoning behind this is because during an uptrend, we will see many signs of both price strength and price weakness. But the point at which we want to sell is when we have a validation of price weakness.

So to put this in another way, the ideal and exact point in which you should sell is that validation of a downward reversal. But the point at which we want to sell is when we have a validation of weakness. Much like with the confirmation, we don't want to buy in until we have a confirmation. With this sort of position, we don't want to sell out until we do have a validation of weakness, because if we sell out too soon, that means we're going to be filtering out a lot of the good plays.

And we know that a break below the SMA line is a sign of weakness, but a red candlestick holding below the validation line. Well, that's a validation of weakness. and that means that our position is now riskier. So when it holds below the validation line, What? that's telling us? it's screaming at us.

It says, your position is riskier, you need to get out. If we sold out at the original break of the SMA line, that would again filter out a lot of plays that struggle back and forth over it. And thus, that's why it's so important to have that validation that it is indeed dropping. Now, this explanation may seem very repetitive because it's so simple.

There's really not much complication to the selling strategy, and it's quite effective for oversold plays. But anyways, for stocks that are oversold or below fair value, it's almost always a good idea to wait for validation. Waiting for validation? Maybe an aggressive approach to selling, but it makes sense overall if we combine it with an undervalued and already conservative position. which oversold position should be if we're analyzing them correctly.

If you're being too conservative with your selling points, that means that you'll automatically sell out in so many different scenarios when the price is actually increasing and you would have made money, so it's sort of a fine balance. Now, with that being said, unless you have a perfect setup or are approaching this from a fundamental angle, holding after validation, holding after validation. probably not a great idea because it's at this area where you now have more probability on average of the stock moving against you. If you understand this comment, the following below.

Charlie I Understand that holding pass validation is dangerous. Now there are exceptions to this, but it's not hard to eat these out by using level 2 quotes, which by the way, I have a video on. So the other way is the conservative approach and this is applied to stocks that are of higher risk. So say we were trading a stock that we think is an upwards overreaction play.

It's extremely overvalued. It could be momentum play, or really any stock that has risen past previous resistance. So if we were to take a position in that, that means that we are going to be taking a position, or, you know, protect, potentially, even wholly, the position that is more dangerous to us than an oversold position. Dust, we have less margin for error, The stock is more likely to move against us, it's more likely to move quickly, and it's more likely to have that ideal sell-off point very soon.

So my approach to this is to artificially create a larger margin of error for yourself. The way you do this is by selling out after the early warning signs of a reversal. Now we know if you wider the gap between the SMA line and the price action, the more price strength they stock has. at that moment.

A stock moving closer to the price action means price weakening, and the price moving farther means price strengthening. So with that in mind, we need to watch each time the price weakens and that's the ideal point at which we should have sold out. Now, oftentimes selling out at this point will cause you to lose out on part of the move. That's the price you pay in order to take on less risk.

No one can consistently time the exact top, but we can get pretty close to it if we're using risk management strategies and timing the upward versus downward potential and picking the correct selling out point. You may have noticed that I've been using the word on average a lot to describe the different possibilities within the market. That's because the probability of this thought going down an individual stock, going up or down on one trade isn't certain, but the probability of many overall is a lot more easier to predict Using certain strategies to improve the probability of your success. Overall, we'll increase the frequency of your success in trades.

If you can figure out how to cut losses quickly by utilizing good selling points, then that further increases your probabilities of success. I Know that I can't teach you to be profitable on one trade if you were to give me one trade tomorrow that you're trading even if I was sitting in front of it. I Can't say that that was going to be a profitable trade, but what I can do is I can give you certain skills and techniques that can improve your probability and the odds of success over many trades. If you implement those correctly and you practice them, maybe Papert rate them until you get them correct and then take them to the market.

That's where you're going to have the highest odds of success. So by this point you should have two ways to determine when to sell a stock. Okay, so if you're trying to set up the SMA line and the validation line, it's very simple. All you have to do is go to edit you have studied, then you go to edit and then I already have them on here but you'd search daily SMA and then you can double click it and then it'll go over here.

Ok, so then once you have it here, all you have to do is go to the little gear box and this is for the validation line I'm you set the price to open its gonna be automatically, all closed probably and then the aggregation period to one minute and a link to two that makes it perfectly reactive and all to see. These specifications aren't exact. these are the ones that I use, but you might find a better combination that you might find that the length of - or the length of three might be a little better for you. Probably not though, because I've tried that many times.

but then my regular SMA line I've covered this in another video but it's just set at these legs and the length is nine and it's the one minute aggregation period. And of course I have it drawn the same way and then I have it in that light I've it in that light blue and that's about how that's set up. So anyways, that's how you have it set up. If you have any questions, you can comment below or reach out to us on the zip code a circle, Facebook group.

But nonetheless, let's just go into a little bit about how you could use this strategy since I'm on here. Ok, so it's just look at a bunch of different grant takers and see where we could have gotten in. Let's see a Mrs. Mrs.

Okay, so how would you know where to get in and where to sell out here? Ok, so if you're looking at this, there's no candlestick that close either below the SMA line or below or held below the validation line. This one got pretty close, but it did not. And then all of a sudden we do have a candle that holds below the validation line as well as the SMA line. And this would have been the point at which you would have sold.

so we wouldn't have gone all the movie if we had taken this one. But you know it's easy to say to some hindsight. but I'm just giving you an example of how to analyze stocks. This is one that we did early in the video, but ok, so obviously this this would have required a larger position size, but it's the same idea.

so you know you buy in at confirmation. This is the confirmation. Boom boom boom boom boom boom boom Ok, we're still holding. We're not.

We don't have a validation yet. We don't have a validation Doo-doo-doo-doo And then we have a validation right? So this this would have given us a little bit of a run-up, but it wouldn't have been. It wouldn't have been exact. It wouldn't have been perfect.

So that would have given us a profit And that would have been a good run up. But let's let's try another one. Ok, so we see this. So how what is this? Is this an overextended position? or is what? I say overvalued you're under extended I don't mean just the RSI I mean just overall.

if you're looking at support and resistance rights, it's because we're not just using this two one time chart, We're looking at all the different ones. No, it's not overextended. It's not overextended. On the longer-term chart, If we're looking at the 10-day chart, it's not overextended at all, right? So this is not an overextended position.

That means there's a lot of room to run up. And this would be in the category where we use validation points right? and then this one went up. and then boom boom Boom. And then we had a validation point right here.

As I said, it's very easy for me to go through these and just show you the exact points at which you should have bought and sold out at. but sort of in hindsight, right? But if you can apply this to the majority of stocks because the probability is always in our favor if we cover it this way. But the challenge is determining whether or not the stock that we're trading is overextended or is trading at the normal range for the given time span. And of course, like you could say that, oh well, this is this is oversold here, but is it oversold in the greater time span? Not necessarily right, not necessarily.

So you have to figure out using your risk management tools using the fundamental analysis tools that you give in terms of earnings, winners and overreaction plays and overall looking at the price moves into the stock to determine if hey, you know this is a stock where I need to use validation points or hey, this is a stock that I need to use the early warning signs of a reversal and then you can choose your approach based on those two. But my recommendation is to try this strategy out. Try both of them out on both different positions or many different positions and just keep doing it over and over again and then see what works best for you. and then then you bring this to the actual market, Start small and then you keep building up and that.

That's the strategy that I would attack. Everyone's always asking me about oh how do I get started Obviously paper trading - something everyone always says but you know, rewind training. It's just on demand trade and all you have to do is go to on demand over here you push that and you can set the time. I Have a whole video on on demand training I Call it rewind training because you can rewind a previous price action, you can make it random, you can make it a David's is this specific day, whatever and you could test out and back test all your strategies and see how they would have fared.

Charlie's a crazy dude so you know, make sure to do your due diligence, go and practice these techniques and figure out hell if they work then you know, don't If they work then they're valuable. If they don't work, then they're not valuable. But like if you go through and look at these you could see finding a confirmation and then selling out at validation is almost always the best approach to go about it. I Found this to be really, really the most effective strategy and I don't think that people often utilize this so it kind of gives you sort of an edge on the other traders.

So anyways, I Hope this video is helpful and if you have any questions, feel free to reach out to us in the zip trader circle. Facebook Group.