Selling Into Strength

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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. Long (or Long Position)

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

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

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

    A change in the direction of a price trend. On a price chart, ...
  5. Short (or Short Position)

    1. The sale of a borrowed security, commodity or currency with ...
  6. Continuation Pattern

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