STOCKS - When do I sell?

STOCKS - When do I sell?

 
 
If your security reaches the pre-determined stop loss price, sell immediately.
If you are unable to monitor the price, place a “stop limit” order with your broker to sell automatically (or buy, if short) should the stop loss price be reached. These orders, often called “stop loss orders” or “stops,” allow you to make the decision once and forget about it. They also expose you to market manipulation—share prices can be driven up or down in order to trigger quantities of stop loss orders (often placed on round numbers). Notwithstanding this drawback, stop loss orders are a good idea for all but the most vigilant and disciplined investors.
The question of when to sell is happier for investments showing a profit. Or should be. As profits grow, greed tends to kick in. More is not quite enough. Also, when investors sell, they part with the source of the good feelings that came with their increasing profits, their increasing “worth.” This can be subtly difficult.
Some investors sell and afterwards agonize that they were too soon or too late. Profits that they might have had or did have are gone, as though they had been thrown away. Investors have been down on themselves for decades because they only doubled their money, selling at $8, then watching the price climb to $90, unable to bring themselves to buy back at higher prices a security they once owned at $4. Greed and ego entangle and paralyze. When to sell?
As usual, there are many answers, and investors must find the one that suits them best individually.
You cannot know, on any given day, that a price has topped (or bottomed, if short). If you close a position, it will almost always be too soon or too late. You are, in effect, guessing before or after the fact (of the top or bottom). Generally, it is better to guess after the fact, to wait until trend lines have turned, giving back some profit in order to be more sure.
Here again, on a decline, investors find it hard to sell and much easier to do nothing, hoping for the price to return to its former level. Many investors have ridden positions all the way up and all the way down. Some investors close their positions automatically if they have given back half their profits, a good idea.
Nothing requires you to sell all of a postion at once. Many investors find it more comfortable to sell part, locking in some profit and leaving the rest of the position in play. A common practice is to sell half of a position if it doubles,  thereby retrieving the original investment. Investors often move their stop loss orders along behind the price, keeping (they hope)  sufficient room for short term fluctuations. They risk being stopped out too soon in a long trend, but their profit is guaranteed.
Some investors have a core holding and a short term holding of the same security. They keep the core holding through larger price fluctuations and trade in and out with the short term holding, capitalizing on their knowledge and feel for the security. This is a good strategy for securities in gradual long term trends—if  you can handle operating in two modes at once.
It is famously said, “If you are losing sleep over an investment, sell down to the sleeping level.” George Soros, a hall of fame investor, sells if his back hurts. You must trade in a manner that feels right, that suits your capacity for risk and loss.
To sum up trading strategy: find your own way to follow the best and perhaps the oldest maxim in the market—cut your losses, and let your winnings ride.