Implement good money management
Knowing when to buy stocks is only part of the overall equation. Many times, the real trick is knowing when to sell your stocks. The first thing to keep in mind, is half of the golden rule of trading, cut your losses short. A good policy is to always sell your stock, when it drops 10% below your buying point. If you bought a stock at $30.00 per share, you would automatically sell it at $27.00. I will generally sell a stock if it drops 5 or 6% below the purchase price.
Have a strong defense
I buy stocks by analyzing both fundamentals and technicals. When I sell a stock, it is based mostly on technical analysis. After analyzing a chart, if it says sell, I do so, no matter what. This is regardless of how the fundamentals look, including earnings and sales. The key to winning really big in the stock market is not to always be right, but to lose the smallest amount possible when you are wrong. This is how a great defense works, knowing when to sell your stocks.
Do not let a winner turn into a loser
Once you have a significant profit, you can give your stock more room for normal fluctuations off its price peak. As an example, if your stock is up 100%, you could sell it if it drops 25% from its high. You would still have a 75% profit. The key is to not let a big winner lose a good share of its gains, or especially, do not let it turn into a loser. Become an expert on when to sell your stocks. It is a key to making a fortune in the stock market.
When the smart money sells
Once the smart money is selling your stock, you should also sell it. The smart money is the big institutions, such as mutual funds, pension funds, and hedge funds. These big entities account for about 75% of all market activity. They can make a stock go up, or down, big time. You can tell when big institutions are selling a stock by implementing proper price and volume analysis. If you see your stock going down in price, on much heavier than normal volume, you know institutions are selling. This is a great clue on when to sell your stocks.
Other key sell signs
After a big run-up in price, over many months, your stock has its heaviest daily volume since the beginning of the advance. This is a clue, it could be the ultimate top. Another key sell sign is when your stock breaks below its 50 day moving average, on heavy volume. Also, watch for signs such as gaps, climax top activities, new highs on low volume, excessive stock splits, and when a long-term uptrend line is broken. These are all signs, telling you when to sell your stocks.
