The Art of Selling Your Stocks at the Right Time

Mar 23, 2022 03:09 PM ET
The Art of Selling Your Stocks at the Right Time

The art of selling stocks at the right time involves evaluating the fundamentals and technicals and making an informed decision that is governed by facts and logic rather than emotions. 

In addition to identifying the right time to sell stocks, this article will also highlight the wrong time to sell such assets. This will form an apt foundation to understanding how to avoid such mistakes.

When is it the right time to sell stocks?

Money for personal needs

At times, the decision to sell a stock has nothing to do with the company's performance. It could be that one wants the funds to complete a personal project such as buying a house. If that’s the case, you may want to hold on to the equities with a more positive outlook and sell those whose growth prospect is rather unclear.  

You no longer believe in the company’s fundamentals

As an investor, one usually purchases the shares of a company based on its positive outlook. Nonetheless, the fundamentals can shift following changes such as changes in the leadership approach or the steady decline in revenues and profit margins. In such a case, it makes sense to sell the stock and buy one that is more promising.

By constantly evaluating the firm’s financial statements and its management performance, one can determine if the recorded decline in prices is just a short-term move or the start of a different trajectory.  


It is possible to sell a stock to lower the tax bill. If you intend to use this strategy, it is important to work with a professional and understand the details of the process. On the one hand, the gains from the sale of such an investment are usually subject to capital gains tax. 

Notably, the applicable amount can be reduced through capital losses. This applies when one sells the financial assets at a loss. Investors tend to use this strategy if the profit-yielding investment results in hefty capital gains tax. If that’s the approach you intend to use, it helps to evaluate the fundamentals and decide which stocks to sell at a loss.  

Opportunity cost

In financial markets, making a particular decision comes at the cost of the option you’ve chosen to forego. Even when the shares you are holding are ‘winners’, it helps to assess other options. Upon identifying more profitable assets, one may decide to sell some of the existing equities and use the funds to buy those with a more positive outlook.  

When is it the wrong time to sell stocks?

Learning how to sell stocks at the right time also includes identifying the wrong time to sell the financial assets. One of the wrong reasons for selling a stock is a knee-jerk reaction to the current performance of a share. 

It is tempting to sell a company’s shares when prices plunge or surge significantly. It is important to note that short-term price movements may not necessarily show the stock’s actual value. While external factors are influential in the stock market, it is important to evaluate the company's overall health. 

Four “don’ts” to avoid selling stocks at the wrong time

Don’t follow the crowd

Don’t get tempted to follow the crowd when selling stocks based on emotions rather than logic. Regardless of the direction that other investors choose, it is important to evaluate the market from a broader angle and subsequently make a personalized and informed decision. 

Don’t focus on timing the market

Investors would hardly incur losses if it was possible to time the market. One cannot always be right in predicting what will happen in a financial market. Even the most experienced traders cannot always buy a company’s shares when prices have hit bottom and sell when it’s at the top. 

From this perspective, it is important to look past the knee-jerk reaction of a company’s stock to news and focus on the fundamentals and a detailed analysis of its price chart. A dip in price may not necessarily mean painting the actual picture of the firm’s valuation. At times, geopolitics, market sentiment, and economic events may lower a share price even if the company is healthy. 

Don’t be obsessed with a stock

It is important to put aside emotions to succeed in the financial markets. It is risky to get extremely attached to a specific investment with reference to selling a stock. For instance, success in the initial stages of an investment may have one cling to a particular stock. When selling shares, it is important to focus on the fundamentals and technicals and set aside your emotions.

Don’t hang on to a loser

While this tip appears rather obvious, it is common for an investor to hold on to a stock when the fundamentals and technicals point to further losses. It occurs when one has the opportunity to sell the shares at the right time. 

However, he hangs on to the idea that it will rebound, incurring even more losses by doing so. To avoid such a situation, it helps to remove the poor performers from your portfolio and focus on the ‘winners.’

Selling stocks execution

Now that we have an understanding of the right and wrong time to sell stocks, the next step is to select the kind of order that will help you maximize profits while minimizing losses. Below is a list of the applicable order types and when to use them.

Limit order:  The order is executed when the share price hits the stipulated level or better. The downside to this order is that you may not get to sell the stock as there may be inadequate momentum to push it to the stated price. As such, use this option when you are okay not selling the shares if they fail to reach the desired price level.

Market order: Executing the sell order happens at the market price within a few seconds. It’s important to note that the price may fluctuate while placing an order and its execution. With this type of order, you may end up selling the stock at a price lower or higher than initially intended.

Stop-loss (stop) order: This type of order is only executed if the share price drops to or below the stipulated level. As such, only use this option when you are okay with selling the stock at a price below the set amount as there is no floor with this type of order. For instance, if the stop-loss is $50, an abrupt drop past this level may have you incur even further losses.

Stop-limit order: It is a combination of a stop and limit order. One is required to set both the limit and stop price. For instance, you can place the stop and limit price at $50 and $45 respectively. This means that if the share price falls to $50, the execution of the limit order will occur at or above $45. However, if the market is volatile, a sudden decline past the placed ‘floor’ will mean that you cannot sell the assets. 


Selling shares is just as intricate as buying financial assets. The art of selling stocks at the right time requires one to constantly evaluate the firm’s fundamentals and avoid making a decision based on emotions. Besides, assessing other viable options allows one to decide on the profitability of selling particular equity in exchange for another one.



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