How Do I Know When To Sell?

Knowing when to sell is perhaps the most exciting part of stock trading.  When you sell, this is the time that you see returns on your investment and make a profit.  Unfortunately, there may also be times when you have to sell at a loss – but, the bright side of this is the tax benefits that you may derive from such a transaction.  Knowing when the sell is perhaps even more critical than knowing when to buy.

In a volatile market like our current climate, you may be tempted to buy and sell frequently in order to make gains off of shifts in the market.  While this strategy may work, it requires constant monitoring, careful research, and perhaps a sleepless night or two.  A better plan, usually, is to buy stocks, hold for a set period of time, and sell.  This holding period also helps to reduce the amount of feeds that you have to buy, which helps to insure that more of your earnings go to your checkbook and not to a broker or agency.

Tips For Knowing When To Sell

1.) Follow the company closely.  Ideally, you want to get to the highest point and sell then.  This, however, is not always reasonable and requires access to a Magic-8 Ball.  A good rule of thumb is to sell stocks before they have plunged 10% below a recent high.  After this point, you are likely not to see an increase and will incur unnecessary losses.

2.) Follow the industry.  Independent companies do not operate in a bubble.  It is important to understand the broader industry in which the company exists in order to predict future gains or losses.

3.) Use resources such as The Wall Street Journal, online stock companies, and information from the Dow and NASDAQ.  These resources will often not only have numerical data but information about the company, the market, and opinions of experts.  The great thing is most of this information is free and available on the Internet.

4.) Research fees that are associated with buying and selling stocks.  These fees directly eat up your profits.  Because of this, it is often beneficial to buy stocks in bulk and hold for awhile, rather than buying and selling rapidly.  Also, consider the use of an online service that charges much lower fees, rather than employing a broker, which will also eat up your profits.

5.) Trust your gut.  Money, including investments, are tied to emotion.  Follow research and advice, but ultimately trust your gut.  Make decisions so that you will be able to sleep well at night.

Related posts:

1. How Do I Know When To Buy?
2. How Do I Start An Online Stock Portfolio?
3. Do I Need A Stock Broker?
4. Two Different Paths to Wealth
5. When Is The Best Time To Sell A Stock?