Here’s What to Do Whenever Your Stock Doubles

How do I handle the really big gains? I mean, what should I do now that my stock has zoomed past 100%? Cash out? Hold? Load up on more? What’s the best move to make now?

I get this question every time one of my readers doubles their money on a stock I’ve recommended.

It’s happened several times. Since we started Strategic Tech Investor a little more than three years ago, my investment suggestions have led to triple-digit gains on both big names like Tesla Motors Inc. (Nasdaq: TSLA) and Netflix Inc. (Nasdaq: NFLX) – and less-known tech companies like Cray Inc. (Nasdaq: CRAY) and U.S. Silica Holdings Inc. (NYSE: SLCA).

[ad#Google Adsense 336×280-IA]Clearly this is a great “problem” to have.

And, I admit, every time I get this question, it gratifies me to know I’m doing my job: helping my readers make a bundle investing in tech.

Yet, it’s completely understandable why many investors – not used to making so much money and experiencing the thrill of victory – suddenly freeze when facing the daunting prospect of “what to do next.”

The fact is, sometimes your gains skyrocket past 100%… and then dwindle as the stock recedes.

That’s why, today, I’m going to show you one simple trading strategy that can ensure this never happens to you.

It’s a strategy I follow just about every time I double my money.

And it’s incredibly easy.

In fact, this single strategy accomplishes something absolutely critical for your future investing success: It removes risk… while still giving you the chance for infinite upside.

Let me show you how this incredibly powerful – yet amazingly simple – strategy works.

You can start using it for massive gains right away…

The “Problem” Every Investor Ought To Have

If you’ve been following along on our journey to create meaningful wealth from tech, I’ve repeatedly told you that doubling our money in this sector isn’t that tough to do – if you know what to look for.

It’s clearly stated in Rule No. 5 of my Your Tech Wealth Blueprint: You need to find companies that are growing earnings at high rates – 15%, 20%, 30% or more a year… and companies that can do this repeatedly.

All five of my rules tell you how I find such companies step by step.

The real dilemma for many investors, however, is what to do after a stock doubles – and you have a chance for some really life-changing gains.

Now, most people will tell you when your stock doubles you have three main options:

  • You can cash out, bank the profit, and look for the next opportunity. This method eliminates any downside risk on the position. And hey, who can criticize someone smart enough to double his money?
  • You can let your position ride but protect your downside with the use of “insurance”-like trailing stops. I’m a big advocate of trailing stops, but if the stock hits your stop, you won’t enjoy any subsequent gains if the stock later resumes its run.
  • Or you can let your entire investment ride without any “insurance” whatsoever. From an overall standpoint, this could net you the biggest profits, but it’s also the riskiest move of them all.

Any of these options potentially make sense, depending on your overall investment goals – and your tolerance for risk.

But I believe my strategy for handling big gains is far superior…

It’s called a “Free Trade.”

It works like this. Once a stock in your portfolio has doubled in value, you automatically sell half. At that point, you’ve recouped all of your original capital – and are working with free money.

You’ve covered your initial investment… and are now literally playing with the “house’s money.”

Having converted your investment into a Free Trade, you’ve really achieved the best of both worlds.

You’ve not only paid for your trade, limiting your risk, but you’re also getting the chance to capture a nearly infinite upside.

Of course, as I’ve said, most people aren’t used to making this much money on a regular basis.

A move like this – coupled with other trading strategies I’ve shared with you – can really juice up your portfolio.

— Michael A. Robinson

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Source: Money Morning