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".

RELATED TERMS
  1. Buy Weakness

    A proactive trading strategy in which a trader takes profits ...
  2. Reversal

    A change in the direction of a price trend. On a price chart, ...
  3. Buying Forward

    An investment strategy that involves the buying of money market ...
  4. Risk Reversal

    1. In commodities trading, it is a hedge strategy that consists ...
  5. Trend Trading

    A trading strategy that attempts to capture gains through the ...
  6. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
Related Articles
  1. Trading

    Understanding Trend Analysis

    Trend analysis is the use of past performance to predict future price movement of a security.
  2. Investing

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
  3. Trading

    Profit Without Predicting The Market

    Traders who try to predict the future can actually harm their trading options.
  4. Financial Advisor

    Why You Should Never Short a Stock

    Short selling a stock means you are betting on the stock decreasing in price. Before taking on this investment, you should fully understand the risks
  5. Insights

    The Market Participant Playbook

    Find out what effect institutional investors have on the stock market and individual traders.
  6. Personal Finance

    A Day in the Life of a Day Trader

    Day trading has many advantages and, while we often hear about these perks, it's important to realize that day trading is hard work.
  7. Investing

    Day Trading Strategies

    Day trading is the term often used for buying and selling stocks within the same day. Day traders seek to make a profit by leveraging large amounts of capital in order to take advantage of small ...
  8. Trading

    Retracement Or Reversal: Know The Difference

    Learn to distinguish between a temporary price change and a long-term trend.
  9. Investing

    When To Sell Stocks

    Buying at the right price determines profit, but selling at the right price locks it in.
  10. Trading

    An Introduction To Price Action Trading Strategies

    For traders who want a mix of technical analysis with their own control in decisions, price action trading offers the perfect fit. Here's how it works.
RELATED FAQS
  1. Why is divergence between indicators important for traders?

    Learn what technical analysts mean by a "divergence" between indicators, and determine why a divergence could be a sign the ... Read Answer >>
  2. How do traders identify confirmation of prices on a chart?

    Learn about some of the crucial tools that traders can use to confirm their price movements on a chart before entering or ... Read Answer >>
  3. How does somebody make money short selling?

    Short selling is a fairly simple concept: you borrow a stock, sell the stock and then buy the stock back to return it to ... Read Answer >>
  4. How do traders and technical analysts interpret the Average True Ranges (ATR)?

    Learn about average true range, a volatility indicator used by technical analysts to pinpoint changing trends and bullish ... Read Answer >>
  5. What risks should I consider taking a short put position?

    Learn what risks to consider before taking a short put position. Shorting puts is a great strategy to earn income in certain ... Read Answer >>
  6. If I believe retail sector companies are overvalued how can I profit from a fall ...

    Examine the various trading strategies that can be employed by an investor who anticipates a decline in stock prices in the ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center