Making money on stocks depends on two significant factors, and the only two factors are buying the stocks at the right time and even more selling it at the right time. However, some experts also say that the profit and loss on stocks has a deciding factor of the time it was bought on. Because if you had purchased the stocks at a time when the stocks were already high, then this would mean that the profits would not be high even when sold at the right time. But again, even if you had bought at the right time and did not sell when the stocks were at their best price, then the buying time is irrelevant because the profit will be low anyway.
Knowing the correct time of selling is walking on the fine line between greed and fear. However, you can keep away from these human emotions with a few strategies.
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When to sell your stocks?
There are two significant reasons for selling a stock– intrinsic and extrinsic. Now, the value of the stocks and the market status is the intrinsic reasons to sell your stocks, and while the financial state of the investor and the factors like these are the extrinsic reasons to sell your stock.
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- Always avoid investing in hot stocks. Maybe you have heard the news go gaga over a meme stock or something similar, and you could no longer avoid the temptation to invest in it, but the second you invest in it, you regret it. You should immediately sell your hot stocks right away, even if this means bearing a small loss because these hot stocks are running on fumes and may disappear overnight as well.
- You wake up and see that the price of one of your stocks has risen overnight, and these gains do not justify that there is no exponential growth. This means that the prices have been increased due to external speculations or rumors and will fall back to their original, if not less, as and when the rumors are taken down. It will be the best call to sell your stocks right away and make some instant profit.
- When you buy a stock of a company, you need to always keep an eye on the quarterly earnings of this company. These fundamentals may deteriorate and watch if the stocks are on exponential. This decay might be caused by multiple factors, like slow earnings, higher competition, higher costs and lower margins, and much more. The quarterly fall of earnings can be early signs of this exponential decay, and you need to read the signs and sell your stock.
- Let us say you bought a stock that has never seen an increase in years, and you have thought to yourself that if it reaches at least this mark, I will sell it. When the stocks finally start to rise and reach that point, one needs to get away from the greed to earn more and sell it immediately.
- Lifestyles reasons are extrinsic reasons to sell your stock but can be a good reason to sell your stock. There is no point in holding many stocks while paying a massive interest rate on a home loan. You can always sell your stocks and make that down payment or reasons like this.
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Can you sell the stocks on the same day you have bought them?
Yes, you can certainly sell the stocks on the same day you have bought them but make sure not to make a habit. Day trading can lead to considerable losses, and when you make this a habit, you might be lucky on days and lose everything on others, and there is no coming back.
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Averaging Down
Purchasing additional stocks of a share that’s prices have plunged can be a way to average your buying price of the stock. But this cannot be and should not be done on all the stocks, and this depends on the kind of stocks, the market value, and other deciding values of the stocks to check if this is a one-time dip or here to stay.
