When to sell stocks

scheng1 By scheng1, 25th Jun 2010 | Follow this author | RSS Feed
Posted in Wikinut>Business>Investment

Selling stocks is worse than rocket science. You have to learn precise mathematical formula to become a rocket scientist. However, there is no formula for selling stocks.

When to sell stocks

Many investors spend more time in doing research for buying stocks than for selling stocks. Some investors become too emotionally attached. They refuse to sell stocks. Many of them regret for years.

Most people, including the rich investors, do not really know when to sell stocks. That is why many people sustain paper loss when the market dived during the sub-prime crisis. Many fund managers were caught with massive paper loss too.

If they do not know when to sell stocks, neither are you able to time the market repeatedly to gain profits.

The best course of action is to hold the stock in a market crash. Let us assume that you bought the stock at $200, and the price is now $40. Is this a good time to sell? Obviously not, unless there is a real risk of the business failure.

If the stock price looks set to fall, you can consider the contributing factor. Sometimes, the stock market suffers a free fall for a day, and stages a spectacular rally the next day. Sometimes, the stock market falls due to the bigmouth of a politician.

Many day traders love the volatility in an uncertain market. They can make a large profit.

There are essentially three reasons to sell stocks.

1. You need money.
You need money to buy a car. You need money to pay for medical treatment. You can sell winning stocks to lock in profits and to cash out from the stock market.

2. There is a big change in the industry or company.
For example, a natural disaster destroys the factory of a listed company, you must sell stocks immediately.

3. The price shoots up due to speculation.
When the share price of the company is unsustainable, you can sell stocks. You can buy again when the share price returns to a reasonable range.

The key is to pay attention to the price movement in the stock market. If you miss out the news about the disaster, you will sustain the paper loss for a long time.

You should consult your broker before selling stocks. It is not the job of your broker to make decision for you. However, he can provide information to assist you in making a wise decision.

About me:

Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways. Personal Finance is about money, from making money to investing money

Tags

Stock Market, Stock Market Investment, Stock Market Investment Strategy, Stock Market Trading, Stock Trading

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author avatar scheng1
About me:

Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways. [link=http://howhealthyisyourpersonalfina...(more)

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