Tuesday, February 5, 2008

Profit Booking

What is Profit Booking?

Profit-booking is nothing but encashing or realising the profit or gain in a share by selling it. E.g., In the market you buy a stock or share say at Rs.150. You are holding it for more than 2 months. Now its quoted at, lets say... Rs.320. The market has been bullish and you expect the trend to continue. So you hold on to the stock. Another week goes. The quote rises from Rs.320 to Rs.325. No doubt the stock is .... still bullish or ... on the rise. But dont you see that there is a slow down in the rise. Yes this is the time to think seriously ....and Sell the stock and take the profit... this is called profit-booking, whether done by individuals or by big operators or by brokers.

The profit-booking normally brings the bull run to a halt or to a near halt. Those who sense it in advance and book the gain immediately are the ones who will get maximum profit. Again, there is no hard and fast rule. Market is always irriational .. as it had .. so far proved to be. But what ever it is as long you stand to gain (gain is more than the notional bank interest on the investment). It is always advisable to book atleast partial profits every now and then.

1 comment:

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