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There’s another side to look at. It’s not all about buying. It’s not all about knowing where the entry is and when you should get in. Trading well doesn’t just come down to some timing indicators that tell you when to get long. To make money in this game, you’ve got to sell, and you’ve got to do it at the right time.

When it comes to selling, knowing your exit ahead of time is half of the battle. Trading according to a plan will take you miles beyond the results you see if you trade on whims. Is this a momentum trade? Is this a swing trading candidate? Is this a trend trade with a trailing stop, or am I looking for a particular number to be reached before I sell? These are the kinds of questions to ask going into the trade.

Once you’re in the trade, there are a number of reasons to sell your stock:

The most common time to sell out all of your stock is when you’re just plain wrong. You’ll know when you’re wrong, because your P&L will tell you so, every minute, tick by tick, dollar for dollar. When your stop-loss gets triggered, sell out! Be disciplined and pull the trigger when the time comes to do so, or else set an automatic stop-loss order through your broker.

Selling in the face of a stagnating market is also wise. Perhaps you caught a nice move but the trend has since stalled out. Your stock hasn’t yet rolled over, but it’s not going higher anymore either. Reducing your exposure and freeing up cash in a market that isn’t moving means less risk to you. You will then have cash on hand to put into new trades, whether for new buys or for short selling stocks if the market weakens.

When your profit objective has been met, do some selling. Making sales after an advance to the area you planned to see is simply good trading discipline. Sell all of your stock if it is now facing overhead resistance, because you can always re-buy if and when the stock clears resistance and breaks out. There’s just no reason to own a stock in an area where the sellers clearly have had an advantage.

You don’t have to sell it all at once! Many traders think they are either in or out of a trade. They look at it like it’s an all-or-nothing type of thing, and it doesn’t have to be that way. In fact, in many cases, it shouldn’t be that way. If you are following a trend, it’s often wise to make partial sales along the way. This books incremental profits, while freeing up cash for other trading ideas. It also helps to satisfy that urge to sell that so many of us fight. Selling off stock in pieces as the trade shows you a profit is a good way to manage money AND emotions.

When you plan your next trade, consider where you will want to sell and where you’ll need to sell. Whether it’s on the profit or loss side, know your exit!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com