Step 1: Sell the stock before it goes down. That’s easier said than done. The trick is to know when it is going to go down, and sell before then. Buying stocks is a trade, selling them is an art. Anyone can buy a stock and make some money, but only those who master the art of selling stocks will get rich.
Step 2: Do your research constantly. This way you will almost never be blindsided by something unknown that will cause your stock to go down. Doing your research should alert you about what’s to come. Read all the news stories about the company.
Step 3: Have a reason for buying the stock. Maybe you bought it because it has a new product coming out. Maybe you bought it because you feel another company will take it over. Maybe you bought it because you think it can capitalize on something that’s happening in the economy. These scenarios are catalysts that can propel the stock higher. Once the catalyst has happened, or once the reason you bought the stock has taken place, you should consider selling it then.
Step 4: Set a price target for the stock. Maybe you buy the stock at $60 and your goal is for it to reach $90, and you have done the research and believe there is a catalyst that will take the stock to $90. So once it reaches $90, sell it! You did great! Lock in those gains by selling it.
Step 5: Another strategy is to sell the stock on the way up. I believe that this is extremely important. If you buy 100 shares of a stock at $60 and your price target is $90, sell incrementally on the way up. You might sell 20 shares at $66, 20 more at $72, another 20 at $78, 20 at $84, and the last 20 shares at $90. Selling a stock on its way up gives you more of a guarantee that you won’t lose money on it if it plummets all of the sudden.
Step 6: There are a few more quick reasons that you might want to sell a stock: Sell it if it keeps going up for a reason unknown to yourself. Chances are its hype that’s sending this stock up. Sell it if it goes down after your catalyst has occurred. Sell it if you can’t handle the stress associated with the stock’s movement. Sell it if you want to buy yourself some new shoes!