Thoughts on Realising Profits
Afternoon all, this is a question that I want to throw out there on people's thoughts on when's the best time to start realising profits in players.
To use my example, a couple of weeks ago I made a list of around 60 players who all play for CL or EL teams (1 in each position) of who I think will be good for PB this coming season. So far I've purchased about 35 of these and plan to add more when I deposit more cash in the coming weeks.
Luckily for me, at the top of my list were defenders, and so I have fortunately caught the trend of everyone buying up defenders
Some of them (Jordi Alba being the main one) are showing very healthy profit levels
I'm just wondering what everyone's thoughts are on whether I should realise these profits and move my now increased bank balance to my other targets or hold onto the players as they are and hope that they continue to rise?
I suppose it all depends on your strategy if you have a long term, mid term, short term and if you are looking to flip, hold for PB or cash out??? I always (well mostly) stick to one philosophy... buy low, sell high but when it can't be done cut your losses and bight the bullet...
If you have profit in a player do you see further profit being made from him? What would you do with that cash when you sell? put it into another player or cash out? what earning cap have you given yourself? is it flexible?
I would state 'IF' i've gone down the route of buying CL & EL players for PB then I wouldn't even consider selling until the group stages of those competitions actually start... Perhaps review after week 3 when teams either look like getting knocked out or qualifying for the later stages.. and review every round after so that you can sell before their value falls if needs be?
Realistically, I wouldn't touch selling PB based players until January at least because during the season these should all hold value?
@dannypea I think your 3rd paragraph hits the nail on the head, I just need to remind myself that I have bought these players because they (hopefully) are capable of good PB scores and trust my original judgement on why I bought them in the first place
It just makes you nervous when a player's price rockets because we all know that it only takes one bad PB score for them to drop straight back down!!
You could consider selling part only of certain players to bank some profit and free up cash for new acquisitions
As already mentioned, depends why you bought them. I like to sell a few though, get some profits to add in additional targets and add more players to my port
I trade short term predominantly although I have long and medium PB holds that I will recycle profits on every now and then. A few have been in there for 6 months+ and wouldn't be surprised if I didn't sell them for another 6 months.
On the trading side though it's hard to pin down exactly as its not systematic, but fundamentally my attitude is that taking profits is essential as a cash reserve can be worth a lot more than a hold, if invested at the right time on the right player.
Another key aspect is to try to sell risers while they are still rising, rather than trying to squeeze those last few pennies out only to watch them slowly drop while sat on your market queue. You'll drop the odd clanger and see them fly off into the distance (I recently took a cracking profit on Marcos Alonso when he was like £2.21). But you move on and use the money on other opportunities. Or even get back on! Don't be afraid to do this if a) something has changed to make him more valuable or b) you misjudged the market and you have come to this conclusion without a hefty dollop of regret and FOMO.
In Alonso's case I considered getting back on because a) defenders boomed only hours later (regret's, I've had a few...) and b) well, defenders were booming what are you waiting for! But I went for Felipe Luis instead who actually returned a higher ROI in the two days I planned to hold. Enjoy those wins where you called it bang on, so you might do a week without another!
I guess this is not realising profits as such, as I will realise a loss in the same manner and using the exact same rationale. Is this player likely to rise by x% in Y hours / days. No? Well I have found someone that I am confident will do this so you are on the list or even winged back at FI.
That last situation is the trickiest of all, particularly if you get caught up in hype. You see some news and looking at the player you are way ahead of the pack, might even be first but you have £10 and you always buy 30. So you look at your portfolio and you see that geezer who has somehow managed to last a few days with no rise and you IS, get on the hype man and make 6%. Decent, particularly if you sold hype man on his rise at a price above what you see his value as.
What have you won there? 6%? 4% (6% profit less 2% comms)? Any chance you have lost money? Sure is, particularly if the player you IS'd is priced at (or a few pence higher than) say 51p, 86p, £1.17, £1.51.
These are the boundaries for spread increases and you have guaranteed a spread cost of MINIMUM 3.9%, 3.5%, 3.4% and 3.3% respectively. If you IS a 86p player and use that money to make a 8% profit on another player, the max you can make from that is...0% after all costs considered. If the player you IS'd has increased by then all of that was a big waste of time and money and you will wonder why you are making bank with each trade and your portfolio isn't rising.
Cash is king, as is not being afraid to list a player on the rise if you think he's no longer better than average value.
Fun fact, the best players to sell if you're looking to fire sale and get on a guaranteed boom are those priced 50p, 85p, £1.16p and £1.50 as their spread is, in nearly all cases, 2.0%, 2.4%, 2.6% and 2.7% respectively.
Eagle eyed readers will note that the spreads get worse at each boundary, 50p players are the cheapest to IS on the whole market bar none.
When and how to sell, and most important of all SHOULD you sell is a very complex area and to a degree is unique to each trader.
Me personally, I have put too much thought into it as usual!
Edited because I cocked up the max profit calc, forgot one of the commission costs #amateur