Profit taking
Profit taking (or profit realization ; English profit taking ) is a stock exchange jargon for the price gain achieved through the sale of trading objects due to previous price increases . The opposite is the loss limit ( English stop loss ).
General
Securities (especially stocks ) or commodities ( raw materials , commodities ) come into question as trading objects . In order to be able to take advantage of profit-taking, the current stock market price must first rise above the purchase price paid . The resulting price gain is the positive difference between the lower purchase price and the higher sales price of a commercial object:
- .
A mere chance of profit must actually be found in a price increase. Profit-taking must have taken place at the latest before the prevailing price trend is reversed. This is the case when a reversal pattern clearly indicates this in the chart . The object of profit taking is only price gains, but not fixed dividends or interest income .
Motifs
The motive for profit-taking lies in the opinion of market participants that the upward trend in a stock exchange price could not continue for much longer or if the price falls below a set lower limit , the so-called stop-loss limit . They have already seen part of the upward movement in the trade as deferred book profit and will try to realize their book profit by selling their trade. Profit-taking is typical of the short-term pursuit of profit of arbitrageurs , speculators and traders . You take profits with the concern that the price gains could be lost again when prices fall.
Course history
Profit-taking occurs especially with stocks . Profit-taking implies rising stock exchange prices, which can fall again through profit realization. This inverse price movement is known as a technical reaction that briefly leads in the opposite direction of the previous price increase or decrease and for which there is no clear reason. Profit-taking then leads to short-term price declines if there are more sales than buy orders for a share . The motive for the predominant sell orders can be profit-taking. Stock market commentators often attribute the falling prices after a high price as an attempt to explain profit taking (“technical reaction”), although this monocausal approach can distract from other possible causes. The technical reaction is a countermovement to the current upward trend and is usually only of a short-term nature.
The realization of profits can also mean that the price of a security can collapse despite a positive valuation or a sustained upward trend. Especially often this occurs as a deadweight called phenomenon in new issues of shares when their price considerably higher than the first day of trading on issue price is.
Profit taking in public law
Profit-taking is also a subject of public law . Here, however, the term has a different content. Profit-taking is understood here as the transfer of profits by public companies to the regional authority or other responsible body . Such federal, state or local companies are oriented towards the common good and strive at most to cover costs . However, if there are profits, these can be distributed to the supporting body if the statutes provide for this. The admissibility of profit-taking results from Article 110, Paragraph 1 of the Basic Law, which regulates the “delivery” of income from federal companies. The municipal economic law also provides for profit-taking on the admissibility of economic participations (e.g. Section 107 (1) and (2) GemO NW). The achievement of profits through commercial operations of the municipalities is permissible as long as the fulfillment of the public purpose is not impaired (§§ 1, 7 Concession Tax Ordinance KAV). There are no legal objections to adequate profit-taking as a secondary objective of a legally permissible main objective.
literature
- Profit taking. In: Achim Pollert, Bernd Kirchner, Javier Morato Polzin: The lexicon of the economy. Basic knowledge from A to Z (= Federal Agency for Political Education. Series of publications. Bd. 414). 2nd edition, licensed edition. Federal Agency for Political Education, Bonn 2004, ISBN 3-89331-503-9 .
Individual evidence
- ↑ Rene Rose, Encyclopedia of Technical Indicators , 2006, p. 763
- ^ Alfred BJ Siebers / Martin Weigert (eds.), Börsen-Lexikon , 1998, p. 176
- ↑ Pierre M. Daeubner, Everything you need to know about technical analysis , 2005, p. 36 f.
- ↑ Dirk Ehlers u. a. (Ed.): Special Administrative Law Volume 1 , 2012, p. 35
- ↑ Hans-Uwe Erichsen / Dirk Ehlers: General Administrative Law , 2006, p. 21 f.