Fading the gap. Earnings runs. Moving average cross over's. Support and resistance. I could go on an on about all the tools a good trader uses to make a trade. In one form or another we have employed each and every one of them, and for the most part, if done right, they work. But, there is one issue that will always make you shake your head in wonder. Whats that? Why didnt I hold?

One time we watched EBAY get to 104 dollars a share. Well, we went long EBAY on 8/11/04 at 76.30. We held it for a pretty long time, and sold a portion on 9/2/04, at 89.53. We had picked up $13+ a share, and yes indeed we were proud of ourselves. Yet, it went over 104. Suddenly selling it at 89.53, looked pretty silly didnt it? Indeed.

One could easily ask why on earth did you sell it? One could easily answer, did you know it was going to go to 100? Do you see the point? There are indeed investments that you are going to make from time to time, when you will take your profit, feel like a king, and then feel like a fool because the stock keeps going higher. But, we have a short memory in this country. This is the same type of thinking that saw tens of thousands of investors get crushed in 200 2003. They all knew their stocks were going higher. They held onto them. They are still licking their wounds.

There is NO answer to this problem folks. Cocky talking head fund managers wrote all sorts of catchy books about let your runners run, and cut your losers. Peter Lynch had the good fortune of buying stocks during the biggest bull market in the history of the US, so he gets to act pompous and wave his hand in the air and say I just buy good companies and let them ride. Well, lots of good companies he bought in 99/2000 spent the next three years underwater.

How do you know when a runner is running? How often do you buy something, it gains 3, 4, 5, even 10 dollars a share, only to roll over and give it all back? Should one hold onto it as it loses another 7% from your entry as the gurus tell you that the proper play is to cut losses at 7%, and let winners win?

My theory is that you really need two if not three separate piles of investment money. First off if you are lucky enough to have a company sponsored 401K, well then, good for you! But if you dont you should have an IRA set up. Then, for your personal investing you really need to approach this with two mindsets. One is the day to day, week to week trades we make, but secondly, what about some buy and hold type stuff?

Im not a buy and hold sort of guy naturally, but the fact is we do put out story stocks that go on to make tremendous gains. Quite often weve suggested Buying a few shares and putting them away for a year to see what happens. Many of those very suggestions, have gone on to be three or four baggers. (tripled or quadrupled in price)

For short term swing trades, the thing that keeps us in the game is taking profits, setting some form of stops and moving in and out when the reasons line up. But that said, taking a longer view approach with a small pile of cash, on specific story stocks, can really reward you. No one knows the future, and hindsight is always 20/20. Its easy to ask why didnt I hold that? But you really didnt know it was going to continue going higher. For that type of trade, find a story thats compelling and take a SMALL position and put it away. If weve done our homework, we should see good results.