When to sell a stock for profit is a common query for those who have recently started stock trading or investing. Stock selling styles vary from traders to investors. Generally, investors want to earn both from dividend and realized gain on their investment.
But, traders want to earn realized profit. For two cases, buying price must be less than selling price. The question may arise- how much profit is enough to sell a stock? Again, what is the proper time to sell your holding? Basically, you should setup target to put sale order.
Your targeted profit margin may be 10% profit or more on cost price. The answer also depends on your trading or investing nature. Before starting investment in share market, you need to learn stock market basic knowledge.
In this article, you will learn 10 stock selling steps to earn profit. Let’s start to learn the whole procedure- when to sell stock for profit.
Step 1. Find out your trading Style
Why does trading style matter for selling shares to earn profit? If you think to become a speculator, you need to take high risk. Speculators sell shares whenever their holding increase. They even sell shares less than 1% profit. On the other hand, Long term investors wait for long time to achieve a targeted profit margin.
Suppose X company’s per share price is 20 dollars. Both day traders and long time investors buy this share at the same price. Two or three days later, share price of this company reaches 22 dollars per share. Profit percentage is 9%. Day traders have high chance to sell the share.
But, long term investors may hold the share for one year. After one year, in case sell price is 40 dollars. That means 100% capital gain. He also gets dividend. So, decide your trading style first.
Step 2. Ensure your available time
When to sell a stock depends on your availability of time. If you are a jobholder, you have limited time to spend on market observation each day. In this situation, long term holding of a good company’s stock is a better option.
If your career is a trader, you have all day time to observe the market during trading hours. Hence, you can choose day trading style, although this style is risky and needs more intelligent and market knowledge.
As day trader doesn’t like to hold share for more time- even they don’t hesitate to lose one trade and gain another trade- they have high chance to make trading mistakes and lose money. Hence, choice up to you! As a trader, you can sell when you achieve a targeted profit or reach at targeted loss. Otherwise, you may hold for long time to earn mazimum profit.
So, have you decided to become a trader or investor?
Step 3. Set up your realized profit target
I think you have decided one of the two styles or two styles altogether. Now I like to introduce third style. Hold your stock until your targeted gain is achieved. Hurry up to set up standard. 10% profit? 20% profit? Even 100% or more gain?
Sorry to say, yet I don’t know your style! My opinion is 10% to 20% profit margin is enough for short term holding and 50% profit is more than enough for investors.
Remember that, even it is better to sell at loss in some situations! If you make any trading mistakes, you should correct your mistakes by following the golden rule of stop loss.
Step 4. Consider the market trends
Everybody wants to make profit. Does it easy to gain? Not so easy. To master your trading styles, you need to study the market trend. From my experience, a Z category share price may reach 10% gain from the next saleable day. Not impressed yet?
If there is no circuit breaker, a trader gain may even higher. Necessary to say that, a Z category share is the worst category share since the company didn’t hold Annual General meeting (AGM) for last closing year and didn’t declare any dividend.
On the contrary, circuit breaker is a rule by stock market regulators, which means a share price will not increase more than prescribed percentage and will not decrease less than predetermined percentage. If a day trader understands market trends properly, he can gain much more than long term investors.
Step 5. Study before Selling
If you hold a company’s stock for a few days, you can observe the trade volume and nature of the stock. Try to forecast the future movement of this stock. If it continuously remain uptrend, don’t hurry to sell.
Don’t make premature sale an up trend stock. If the stock behaves unpredictable and forward to down trend, you must sell as early as possible. Study the nature of stock regularly to get ideas when you should hold or sell.
Step 6. Try to become an analyst
Technical analysis such as RSI indicator helps to know the price movement and fundamental analysis such as EPS, dividend yield and P/E ratio helps to know the foundation of company. Both chart analysis and foundation analysis expand your knowledge to take better decision.
Candlesticks chart is widely used chart. This chart shows the price movement in real time. Study the pattern of candlestick chart. On the other hand, financial statement and ratio analysis show the basic foundation. You should learn tricks and tips of both techniques to become a good analyst.
Step 7. Control your Greed and Emotion
Emotion and greed may distract you from right decision in right time. In many cases, I lost trade for greed. Sometimes, my stock reaches to sell point. But, I didn’t sell for further rise. Price then fell and I had to sell at loss. Both right stock and right time decision can bring profit. Don’t lose your mind to sell out at right time.
Step 8. Don’t regret after stock selling
Price may rise further after your sale. Don’t regret for premature sale. Wait for another opportunity. Price may even down after your sale. Stop wasting time and search the next chance.
Step 9. Find out opportunity before stock selling
You have free cash after selling stock. To utilize the opportunity, find out better stock before selling. In my case, I select two or three items before selling my current stocks. Follow the market trend to pick right stock for right time.
Don’t hurry to buy. Even it is better to wait many days for perfect buying time. If you cannot gain in buying, you will not gain in selling. For long term investment, you need to know how to buy stock for long term investment.
Step 10. Enjoy your business
After all, you need to happy with your loss or profit. If you lose interest on stock business, you will lose money. Why should you buy or sell stock? For money. Earning money is not easy task from stocks. Your persistence may make you rich. Enjoy every step of your business.
If you miss any opportunity, you should wait for another time. Never stop learning the query: when to sell a stock for profit!
Stock business is a kind of addiction. An investor doesn’t invest any physical good in stock market. A trader earns profit means another trader has lost money for wrong decision. Stock business for intelligent. It takes time to develop skill and takes short time to earn more. Try to develop skill gradually so that you can know when to sell a stock for profit.