What is the secret of those traders that succeed in trading stocks? Most beginners believe that it is their skill to choose stocks with the biggest potential. However, there is another aspect novice traders do not take into account ― successful traders know when it is time to get rid of prospectless assets. Do you want to learn more about it? Read our expert tips.
All in all, professional traders single out 5 key reasons why one may decide to sell his stocks:
1. To fix profits. Before buying a stock, you must develop a plan. So, when its price reaches the highest limit you expected, it is better to sell it to get profits.
2. To prevent further losses. If you watch graphs or statistics and see that the asset you own keeps on decreasing in price despite your plans and expectations, do not hope for it to skyrocket. In case you are already losing money, it is the situation when to sell stocks is the best solution.
3. To stop losses caused by a wrong strategy. When a trader decides to invest in a certain asset, he usually has an idea why it should grow in price. It can be based on its ratings, perspectives of the corresponding company, political events, overall growth of the industry, etc. And, over some time, it gets evident whether that idea is true to life. If you see that your plan is not working as expected, abandon it and make conclusions.
4. To get some extra money for the necessities of life. In such cases, it is better to preserve at least those assets, which constitute the basis of your portfolio.
5. To prevent losses when there are significant changes in the standing of the company. If the company chosen starts to face serious problems, for example, its returns drop dramatically or its growth stops, it is time to sell such risky assets.
In sum, every trader must understand that he cannot win every time he opens and closes a trade. Some of the stocks bought may lose their prospects at some point. In such cases, one must be ready to sell them without regret.