Selling Into Strength

AAA

DEFINITION of 'Selling Into Strength'

A proactive trading strategy carried out by selling out of a long or into a short position when the price of the asset being traded is still rising but is expected to reverse in price. Opposite of "buying into weakness".

INVESTOPEDIA EXPLAINS 'Selling Into Strength'

For example, say a trader believes ABC stock will rise above $5.00 but expects it to reverse at $5.75. If the trader buys ABC stock at $5.00 and sells when the price hits a predetermined exit price of $5.50, that trader would be selling into strength. Conversely, a short seller may sell into a rising price with the anticipation that the stock price will soon decline.

Many traders will wait for confirmation of a change in price movement before reacting. However, by the time a reversal is confirmed, it may be too late and the trader may end up losing. Thus, by trading against the prevailing trend in the anticipation that it will soon reverse, the trader allows him- or herself a greater margin of safety. As the saying goes, "missed money is better than lost money".

RELATED TERMS
  1. Continuation Pattern

    A technical analysis pattern that suggests a trend is exhibiting ...
  2. Fade

    1. A contrarian investment strategy used to trade against the ...
  3. Long (or Long Position)

    1. The buying of a security such as a stock, commodity or currency, ...
  4. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
  5. Profit Taking

    The action of selling stock to cash in on a sharp rise. This ...
  6. Reversal

    A change in the direction of a price trend. On a price chart, ...
Related Articles
  1. Momentum Trading With Discipline
    Trading Strategies

    Momentum Trading With Discipline

  2. Trailing-Stop Techniques
    Active Trading Fundamentals

    Trailing-Stop Techniques

  3. Trading Double Tops And Double Bottoms
    Forex Education

    Trading Double Tops And Double Bottoms

  4. Market Strength Tutorial
    Trading Strategies

    Market Strength Tutorial

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center