Before I figured out when to sell stocks I would typically take profits too early or worse – let profits turn into losses!
Selling stocks properly is where profits are captured and money is made.
Once I figured out how to sell stocks properly my investing results skyrocketed.
This page provides an overview of the most useful and profitable stock selling strategies.
Just a quick read through this page will provide above average stock selling skills – enabling you to capture more profits and prevent more losses than ever before.
Here are 3 strategies to help identify appropriate sell prices to both capture profits and prevent losses.
I use these concepts to know when and how to establish sell prices helps put my portfolio on automatic. I no longer lose sleep worrying about tomorrows stock market and my portfolio
1) Stock price moves below a moving average
A dependable exit strategy is to sell when prices drop below a moving average.
Many people think that this strategy is a self-fulfilling philosophy. In other words it works only because most people think it does. And they might be right.
As long as it works I am ok with that. I don’t need to understand why it works – just that it does.
Professionals and big money institutions typically watch the 50 day and the 200 day moving average. So those moving averages are good to watch.
There a few considerations when selecting the best moving average to use.
First, depending on your investing horizon you might want to select a longer period of moving average. The most popular moving average periods are the weekly or the daily moving average.
Second, after identifying your investing horizon you need to then select the number of periods to include in the MA.
Using longer periods like the monthly is too long to take advantage of many cycles in the stock market. Using monthly cycles is more akin to a buy-and-hold mentality. Anything shorter than a daily moving average is day-trading.
2) Falling demand for a company’s stock
The demand & supply relationship is the universal price mover for any item in our world. If demand is greater than supply then prices move higher. If supply is greater than demand then prices move lower.
The price changing capability of the demand/supply balance is a fact no-one can argue with. That is the primary reason to use demand/supply assessment across the stock market as a whole, sectors, and individual stocks.
The easiest method to determine the demand/supply relationship in the stock market is the On Balance Volume metric. View how OBV is used to determine demand/supply for stocks.
3) Price crosses below trend line
Strong stocks (stocks in high demand) typically move in a series of higher highs and higher lows.
This type of price movement is typically referred to as a stocks “price trend”. In this case the stock is in an “uptrend”.
Weak stocks (stocks in low demand) can also exist of a series of lower highs and lower lows. In this case the stock is in a “downtrend”.
The attached image shows Chipotle (CMG) weekly stock price for 3 years, starting in June of 2013 to June of 2016.
This is such a great example of how this strategy would have captured profits very near the (so far) top of the market for CMG.
The e-coli news became public knowledge in October of 2015.
Using either the trendline or the moving average strategy would have sold you out of this stock before the drastic breakdown int CMG’s stock price.
There they are, 3 simple strategies to selling stocks
Use any of these 3 strategies to know when and how to sell stocks.
Remember that profits are only captured, and losses are only prevented when stocks are sold. Knowing how and when to sell stocks properly is critical to profitable investing.
Knowing you can sell stock using any of these strategies will help put your portfolio management on automatic.
These strategies support keeping winners for the long term and cutting losing trades before they do any real damage to any portfolio.
In addition, these are the strategies used to set stock sell prices in the model stock portfolio.