Selling Into Strength


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".

BREAKING DOWN '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".

  1. Short (or Short Position)

    A short position is the sale of a borrowed security, commodity ...
  2. Profit Taking

    The act of selling a security in order to lock in gains after ...
  3. Long (or Long Position)

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

    A change in the direction of a price trend. On a price chart, ...
  5. Continuation Pattern

    A technical analysis pattern that suggests a trend is exhibiting ...
  6. Trend Analysis

    An aspect of technical analysis that tries to predict the future ...
Related Articles
  1. Trading Strategies

    Momentum Trading With Discipline

    This type of strategy demands controlled decision-making, requiring a continual refinement of entry and exit techniques.
  2. Active Trading Fundamentals

    Trailing-Stop Techniques

    The important decision to exit a position must be based on more than emotion if you want to be a disciplined trader.
  3. Forex Education

    Trading Double Tops And Double Bottoms

    We look at how Bollinger Bands help accurately project entry and exit points for pattern traders.
  4. Trading Strategies

    Market Strength Tutorial

    Here you can learn about some of the indicators that traders and brokers use to determine the direction and strength of the market's present trend.
  5. Professionals

    Top Stocks to Short, Go Long On to Beat the Market

    A long/short portfolio can help weather a variety of market scenarios. Here's how to put one together.
  6. Chart Advisor

    4 European Stocks to Consider Buying

    European companies, listed on US exchanges, that are providing buying opportunities right now.
  7. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  8. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  9. Technical Indicators

    Why MACD Divergence Is an Unreliable Signal

    MACD divergence is a popular method for predicting reversals, but unfortunately it isn't very accurate. Learn the weaknesses of indicator divergence.
  10. Chart Advisor

    Expecting a Big Breakout In These 4 Stocks

    These stocks are tightly wound following big moves, and upon breakout more big moves could ensue.
  1. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  2. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  3. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  4. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  5. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  6. How do you know where on the oscillator you should make a purchase or sale?

    Common oscillator readings to consider making a buy or sale are below 20 or above 80, respectively. More aggressive investors ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!