Stock investing would be so much simpler if those wretched shares would just move up in a straight line!<br /><br />Profit taking is healthy<br /><br />You’ll often see a price fall put down to ‘profit taking’ – that is, after a run-up in the price, many investors will sell some stock and take some profits off the table. It’s often a sound strategy. The BP Holdings Tax Management leadership team often top-slice a holding after a decent run-up even if still like the stock, it’s worth selling down say a third of the holding .<br /><br />The way BP holdings see it, it’s a kind of insurance policy. BP Holdings can always buy back stake if the share suffers a nasty fall, and if not, then at least the other two-thirds will be doing okay.<br /><br />And remember, that for every seller there’s a buyer. In this case, the new buyer (that took my stock) will have a higher entry point than mine. Hopefully, he won’t be looking to take profits until some way down the line.<br /><br />Profit taking is great. It allows the early entrants to get out and helps fill the stock register with fresh blood with higher expectations for the price. It’s a healthy thing.<br /><br />Don’t let traders shake you down<br />Of course it’s a concern when you see the share price slip. Is this the end of the bull run? Well, of course it may be, but it’s just as likely to be a short term correction allowing holders to take a few quid off the table.<br /><br />And these days, short term traders are increasingly making their presence felt. Much of it comes down to automated computer trading. These robots don’t give a fig about the underlying business, so in some ways they could be dangerous.<br /><br />A long-term investor’s holding period is likely to be anything from a year to forever. They buy a stock at £1, and may be expecting to sell for £2 sometime in the future.
