When to Sell a Stock

Buying a stock is relatively easy, but selling it is usually a more difficult decision to make. Many investors/traders have trouble selling a stock, the stock is going to the Moon🚀 then there's the "Greed" factor.

In the 1987 movie "Wall Street," Michael Douglas as Gordon Gekko gave an insightful speech where he said, "Greed", for lack of a better word, is good." He went on to make the point that greed is a clean drive that "Captures the essence of the evolutionary spirit".

Selling a Stock Is Psychological

Here’s how to lose your Edge: You buy shares of stock at $25 with the intention of selling it if it reaches $30. The stock hits $30, and you decide to hold out for a couple more dollars in gains. The stock reaches $32, and greed overcomes rationality. Suddenly, the stock price drops back to $29. You tell yourself to just wait until it hits $30 again. This never happens. You finally succumb to frustration and sell at a loss when it hits $23.

Here’s how to keep your Edge:

To remove human nature from the equation in the future, consider using a limit order, which will automatically sell the stock when it reaches your target price. You won’t even have to watch that stock go up and down. You’ll get a notice when your sell order is placed.

Embrace the Uncertainty of Probability.