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Improve Your Trading by Learning How to Sell
by Amey Shivapurkar
There is a reason why there are so many profitable strategies and methods when it comes to trading stocks: it is easy to do. I'm serious. If you look at the history of a list of random stocks odds are that you'll find more than half of them higher than they were 5 years ago. Its just the way things work. Obviously, in order to stay in business you must do something right, so companies grow over time.
Since we just covered that it is easy to make profitable trades, the real key to being successful at trading stocks is to know when to sell. You will rarely ever catch stocks at their very tops or bottoms, so you need to know when to sell. Whether its capturing profits or to avoid losing more money, the art of selling can mean the difference between hitting constant losers or banging out winners.
Referring back to not being able to call the bottoms and tops all the time, that means that there will be occasions when you buy a stock and it heads lower. Does that mean you sell right away? Sometimes you just need to let your stocks breath and works it way out; however, there are times when your trade is really a bust, so let me share 3 rules I use to determine when to sell a busted trade...
1. Bad News - Regardless of how much research and risk management you use, the inevitable will always happen. Maybe some type of natural disaster , company being sued, or threat. Whatever it may be, certain news affects certain stocks. If pertinent bad news break, then its probably a good sign to sell.
2. Large Volume - If technical analysis is your thing, then you're probably aware of the importance of volume compared to the move in stock price. If there is heavy volume on a swing downwards, then its probably a good sign to sell.
3. Doesn't Follow Plan - You should always have a plan before entering a stock. Where to buy and take profits; however, sometimes these plans don't play out like they were supposed to. For example, if you bought a stock that is supposed to rise as oil goes up and oil goes up but stock doesn't, then you might want to consider selling.
About the Author
The key is to not be afraid of red. Unless there is truly something that has developed and working against your trade, then let the stock run. Being quick on the trigger could cost you more in the long run and that is not always cheap stock trading.
Amey is creator of Chart Pattern Manifest, which teaches traders how to properly use technical analysis to accurately predict stock price movement.
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