When to sell a stock?

When to sell?

The #1 hardest question I get every day!

The two biggest reasons I start thinking about selling are:

1) I need Capital for

a. Another investment

b. Risk Management

2) I start worrying about a stock’s price movement.

So here is a breakdown of 7 Reasons to Sell:

Reason to sell #1

When I start watching price excessively it is usually time to trim or sell the position. It doesn’t matter if I am up or down, if it’s causing stress, I haven’t sized the position correctly, or intuition is telling me it’s time to get out.

Reason to sell #2

When I start a position, I give it my own price target (PT). Once the target is hit, I either:

a. Sell

b. Change price target

c. Trim & change price target

Many factors affect this decision, but if I start watching every % change see reason #1

Reason to sell #3

When the price does the unexpected. If a stock is dumping, and the cause is unknown or against thesis, it’s time to sell. If the price runs 200% in 2 weeks ($PLTR), maybe it’s time to take some profit also.

Reason to sell #4

When a stock underperforms it’s peers. Another way of saying, dont fall in love with a position. If a position is moving sideways, or down, while others in sector are soaring, it’s time to sell. Used mostly on spec positions, not long term holdings.

Reason to sell #5

When a better opportunity is found. When I find a new investment; either for growth, income, or diversity and need Capital I review all holdings for the criteria in 1–4 above. If that doesnt produce results, I move to #6.

Reason to sell #6

Position size. A position that has ran 200% can quickly become outsized from original capital allocation plan. It is usually best to let winners run, but occasionally they grow too big. If I trim here, the opportunity needs to out weigh the existing investment or reason #7.

Reason to sell #7

Raising Capital. Whether for other investments, taxes, bills, or risk management. I review all the above reasons for obvious places to trim/sell. If none found, I start cutting the lowest conviction positions until fund requirements are met.

Selling is the hardest part of investing/trading for many people (including me). I error on the side of selling new positions early, and holding conviction positions long. Mistakes happen, and my biggest indicator is still my gut. If it doesn’t feel right or too good to be true no harm in getting out and living for another day. Hope this helps you in your own trades.

Disclaimer:

This is not a Financial advise. Do your own due diligence. Trade and Invest on your own risk.

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Chu

I write sometimes......

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