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Market Cycle, Fundamentals Influence How Long To Hold

If you have a big winner in hand, the key question is this: How long should I hold the stock

There's no easy answer.

It depends a lot on what point you invested in the market cycle. A bull market tends to last two to four years. The big money tends to be made in the first year or two.

In most cases, profits should be taken when a stock rises 20% to 25% past a proper . Then there are times to hold out longer, like when a stock jumps more than 20% in three weeks or less. These fast movers should be held for at least eight weeks.

For market leaders, the typical time from to peak ranges from 12 to 18 months.

But when you truly have something special in your hands, you have to give it room to bloom.

"If you really know and understand a company thoroughly and its products well, you'll have the crucial additional confidence required to sit tight through several inevitable but normal corrections," wrote IBD Chairman William O'Neil in ".

Staying with a stock for some time will allow gains to compound. Winners may be held for years. One of O'Neil's huge winners, Pic 'N' Save, was held for more than seven years.

Microsoft (MSFT) was a gigantic winner from the late 1980s through the late 1990s. With its dominant position in operating systems and productivity software, its stock skyrocketed from a split-adjusted breakout near 90 cents in September 1989 to its high of 119.94 in December 1999.

Cisco Systems (CSCO) soared 75,000% from an initial buy point in late 1990 before finally topping in March 2000. The networking titan had huge earnings and sales gains as well as juicy profit margins and a high return on equity.

Both Microsoft and Cisco Systems were among the best at what they did. Both companies also benefited greatly from the tech and Internet boom.

Chipotle Mexican Grill (CMG) was a big market winner in recent years. After the 2007 to 2008 bear market, the stock bottomed before the market did in March 2009. The stock later broke out to 52-week highs in January 2010 and ran up 348% before topping in April 2012. It built a series of bases along the way.

The firm delivered quarter after quarter of double-digit earnings and sales gains, thanks to its simple menu of fresh, higher-quality ingredients.