Sell:(ARST)

I've been waiting a long time for the post I get to make tonight.

A long, long time.

Today, I sold (ARST) for a 20% gain.

The CAN SLIM system works on the premise that with the high quality of leading stocks you're purchasing, even if you are only right 40-50% of the time on your picks you will still be well off booking a 20% gain for every one or two 5% losses. Studies show that most stocks consolidate after an advance of 20-25% beyond a proper buy point, which is the reason for the 20% profit target.

The problem is that due to a variety of factors I haven't worked the system well at all. For one thing, I started investing at the tail end of a bull market. The odds were already against me. For another thing, I'm new to investing - again this stacks the odds against me.

I've made more than my fair share of mistakes, but tried always to learn from them. I've seen signs of progress along the way, and I know that I'm more effective today than I was when I began almost three years ago. Still, it was disheartening to look back and see that October of 2007 is the last time I sold a 20% winner. Between then and now I've lost a lot of my capital on losers. Some were legitimate trades - it's been a tough market and there's nothing wrong with nibbling at new rallys. However, many were just boneheaded plays like my recent attempt to short the S&P 500 - all that served to do was nullify today's profits!

Slowly but surely I'm getting it though. I needed to fail in order to succeed. I needed to feel the sting of losses to learn how valuable my capital is, and how skeptical I should be of any new purchase. Which is not to say that because of today's success I now see myself as having 'arrived.' I just recognize some progress.

Ok, so back to the reason for my reflection. I sold (ARST) at $16.74 today - 20% above the pivot point of $13.85 from several weeks ago. I believe this stock will go higher, and in fact it took off so quickly this morning I almost missed the opportunity to sell - I'll need to consider sell limit orders in the future, which is what I ended up using today. The important point is that I didn't rely on what I believe or think about this stock - I took the gain. I realize how difficult a 20% gain can be to come by, and I'm no longer looking for a 'home run.' I'm more than satisfied to make a 20% profit and consider that a successful trade, no matter what the stock does from now on. Of course I'll keep my eye on it for another buying opportunity. It will base sooner or later.

My previous sell rule was a 5% trailing stop when a position gets up 20% and I've scrapped that - if I'm going to sell I'll sell, there's no need to goof around and risk giving back some profits.