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In stock trading it is important to invest in the right stock at the right time. True, but it is only the half of the story, you need to sell that stock on the right time as well to get your profit. No matter how good is the stock that you have invested in no matter what at what price you have invested in the stock, the trade can not be said to be a profitable one until and unless you sell the stock at the right time and close the position to bring your profit home. By the right time we mean to say before the stock starts to fall at the stock market. Every stock goes through a cyclic pattern of high and low in the price. Once a stock reaches at optimum price for given period of time it can stay there for sometime or can fall. This is the general tendency for every stock. As an investor you have to decide when you should ideally sell the stock to get the maximum profit possible.
Use technical analysis – To determine when you should ideally sell the stock that you have invested in, you need to have a clear idea of the pattern of movement of the particular stock. Once you know the optimum price level for the stock at a given period of time you can easily determine when it is the best time to sell the stock. To determine that price level and to get an idea of the future movement of the stock, technical analysis is the best effective solution.
Technical analysis is a process in which past movement of the stock, current price of the stock, and trading volume are taken to into consideration. Based on this information the movement of the stock is projected through different graphs. There are different principles like the candle stick method, Dow Theory and Elliott wave principle that are followed to do the technical analysis of the stocks. In technical analysis so many factors are considered including cyclic regressions, relative strength index, moving averages, regressions, and inter-market and intra-market price correlations. These indicators are used to graphically present the ups and downs of the stock price in period of time. With the use of certain tools you can easily compare the pattern of the movement with the past history of the stock to have an idea of the future movement of the stock.
Presently there are so many software applications that lets you technically analyze the stocks without knowing much about the theories and principles about technical analysis. You need not even get into complex calculations with these tools to determine the expected and optimum price level for a specific stock at a given period of time. So with the help of technical analysis it is now possible to flawlessly determine how much a stock can rise at a point of time and once you know that you are well aware of the fact when you should ideally sell the stock.
Do not love the stocks – Most of the traders fall in love with the stocks that have given them good return at a point of time. They prefer to hold the stock in assumption that it will get them more profit. But if the indicators and the result of the analysis show that the stock will either fall or remain at that level for that time you should never hold that stock. While trading at the stock market always remember that you should take your trading decision on the basis of the numbers and not on the basis of your emotions. When it is about trading in stock market the numbers should get the first priority.
Do not panic – The psychology of the market has a deep impact on the price of the stocks. That is true but you should not panic and sell your stocks in a hurry simply because others are doing so. You should go by your reading of the market and what your analysis has to say about the stock that you are holding. Have faith on yourself and device trading decisions on the market trend on not on the basis of rumors and wild guesses
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