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. Reversal

    A change in the direction of a price trend. On a price chart, ...
  2. Risk Reversal

    1. In commodities trading, it is a hedge strategy that consists ...
  3. Short Sale

    A short sale involves borrowing shares in anticipation of a price ...
  4. Short Sell Against the Box

    The act of short selling securities that you already own. This ...
  5. Buy To Close

    Buying to close involves purchasing an offsetting position to ...
  6. Day Trader

    A investor who attempts to profit by making rapid trades intraday. ...
Related Articles
  1. Investing

    Gauging Major Turns With Psychology

    Knowing what the market is thinking is the best way to determine what it will do next.
  2. Investing

    Using Mutual Funds to Profit From Market Dips

    Stop hoping for the indexes to go up and start investing in mutual funds that do well in dips.
  3. 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.
  4. Trading

    Forex Market Sentiment Indicators

    Sentiment Indicators are another tool that can alert traders to extreme conditions.
  5. Trading

    Risk Reversals for Stocks Using Calls and Puts

    Risk reversal strategies can be a very useful “option” for experienced investors who are familiar with basic puts and calls.
  6. Trading

    Profit Without Predicting the Market

    Traders who try to predict the future can actually harm their trading options.
  7. Trading

    Retracement or Reversal: Know the Difference

    Learn to distinguish between a temporary price change and a long-term trend.
  8. 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.
  9. Trading

    Advanced Candlestick Patterns

    Go beyond the basics! Learn to identify and trade island reversals, kicker patterns and more.
RELATED FAQS
  1. What is the difference between a short squeeze and short covering?

    Learn about short covering and short squeezes, the difference them and what causes short squeezes. Read Answer >>
  2. Short Selling Vs. Put Options: How Payoffs Differ

    The payoff difference between the two comes down to the difference between option and obligation. Read Answer >>
  3. How is it possible to trade on a stock you don't own, as is done in short selling?

    Understand how the process of short selling allows a person to sell a stock without technically owning it. Read Answer >>
  4. Why Is Short Selling Illegal in Some Countries?

    Discover why many countries banned the practice of short selling financial stocks—but not the US. Read Answer >>
Hot Definitions
  1. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  5. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
Trading Center