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When to Buy and Sell Stocks

| Swing Alpha on 7 Mar 2017 12:00 AM
When to Buy and Sell Stocks

A big and a common mistake new investors in the stock markets always do is selling a stock too soon. But I am sure you don’t understand what too soon means. According to the past studies, it is clear that experienced investors are likely to sell their stocks at a profit rather than at a loss.

Although this may be perceived as counter-intuitive, it is much linked with research on how marketers in the markets make decisions. It seems that investors are likely to take with them a small profit rather selling at a loss. This confirms the biggest blunder we do and closing the door on probable rebound.

As a new investor, the stocks on the market keep on falling and rising every single day and this leaves you wondering: How do you figure out the right time to buy or when is best to sell? Finding a stock to purchase is one of the most rewarding and fun activity to do. To some investors, it is quite lucrative in that they purchase a stock that increases in price in the end. As an investor, sometimes you have to make impulsive decisions. Should you sell, buy or hold? Not every time you will contact your stock analyst so that you can make a decision. So what do you do? This article will provide key information that will help you, as a new investor, make conscious impulsive decisions and enjoy your journey in the stock markets.

There are many worthy reasons to sell your stock at a profit, but there is rarely a good reason to clutch on to an inveterate losing stock. So when is the best time to trade at a profit? Some would contend that trading is a deliberate practice just similar to purchasing while others would caution to never trade winning stocks.

Do you wait for a sign that the stock is near to reverse direction or do you take your profits and run? There are a couple of things or rather warning signs you may look at so that you may know when to buy, sell or hold stocks. This article will provide some of the tips to help you understand the stock markets better. Besides, the article will help you know when to buy or sell your stock.

Tips when to Buy or Sell

Analyzing Earnings

One simple trick is checking the companies’ previous earning reports. Read the reports carefully. If the business keeps on failing to deliver its promises that mean its stock will get clobbered. On the other hand, a positive report is an indication of positive results

Are the sales decreasing in price or are they growing? Every investor would like a stock that is projected to grow. The next step in analyzing the sales is to ask yourself, is the growth triggered or related to a one-time event, or is it real? Read the press release of the company’s management to understand this. You have to look at the numbers. Be careful. You have to figure out whether the company experienced some windfall or did it sell an asset this it makes it look like it is growing. Did the company you are about to buy stocks from or sell to experience an inside growth? Check on the reports whether these are seasonal variations.

What many people do not understand is the fact that smaller companies that have the potential of growing are the best. Check for smaller businesses that are growing by 10%, per year. On the other hand, when you opt for a larger company, make sure its growth is 3% annually. As a good investor, don’t limit yourself by just checking the reports of the previous year, check even the last quarter. Last quarter’s upward trends is a good sign.

Selling Strategies

Other selling strategies encompass the deliberate consideration that events are moving contrary to your stock and there is need to take action. Below are some ideas:

•    Watch growth. Stocks grow. When they stop to grow or when the growth starts to slow down, it’s time to take action. The stock market is completely not kind to stocks growing that fail to tolerate their increase.

•    Watch out for hype. In a situation when your stock becomes a focus of the media, or a lot of buzzes is directed to it, it may be the right to look at taking returns. Such and many other stock-feeding frenzies appeal to the new and inexperienced investors only to have the market breakdown when the excitement expires.

•    Better deal. Consider stocks that can bring you better returns with much fewer risks. The fact that you have a stock that is good and with nice returns, does not mean you should stop eyeing on deals that are better.

•    Take part off the table. When your stock gives you good returns, consider trading or rather selling maybe 50% and taking profits and allowing the other 50% grow. This way you will never lose everything.

Eliminated or Dividend Cut

When enterprises begin eliminating or cutting dividends, it the right time to earnestly consider plummeting it.

A dividend cut signal financial difficulties and are serious events that all investors should pay attention to.

Target Price

What many investors do is setting a lower or floor stock price that helps them make a decision when to trade. An investor can also set a higher stock price that will help you trigger your sales.

The logic here is that you may panic that the stock will have a problematic time supporting a market price above a convinced level and any insinuation of negative news will send the value into a drop.

Other investors argue that “I want to make this profit and when that is done, I’m going to proceed on to a different opportunity.”

Fundamentals Fail

Do not relax and wait to panic over a decrease in returns or another significant fundamental. Be prepared and ready to unload the stock while you still have a strong profit.

In case the company’s sales, cash flow, debts and other fundamentals start to show signs of stress, it might mean something has changed that will affect the price of the stocks negatively.

Don’t be too speedy

Make sure you do not eat into your profits by trying excessive trading with the aim of always maximizing your investment. Always note that a few and smart trades will always beat many mediocre trades any day.

3 Mar 2017 4:38 PM | Anonymous

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