Successful selling

All investors are looking for the right moment to buy shares. The right time to buy shares is determined by the price of a share and the trend in which the share is moving at the moment. Tools are used to determine the right buying opportunity of a share. Besides that, it takes a lot of time to figure out what the trend is. But what about selling shares and the selling opportunity?

Selling shares is usually done without a prior analysis. If an investor thinks that he or she has achieved a good profit, the shares are sold. This also happens when an investor really cannot afford to make more losses. These are usually not the right moments to sell the shares you have in your possession.

Decision points

To determine the right moment to sell shares, all possible decision points should be clear. There are really only two decision points. One at the moment you do not own the shares and you want to buy them. And another decision point when you do own the shares, and are looking for the right time to sell them. Also the questions that should be asked, are not that difficult. At both decision points, the question should be asked: “Do I want to have the shares in my possession?”.

The first decision point is to determine whether you want to buy the shares of a company. Before buying the shares you have to find out whether the shares are worth buying. For this you can choose any time: you will not lose money if you buy a share at another point in time. However, you can lose profit by buying the shares at another time. And if the share is not an attractive investment, you can always look for another share.

The second decision point is the point where you want to determine whether to sell the shares or not, the so-called exit strategy. Here again you have to determine whether a stock is worth buying. Only in this case, you do have to follow the share at all time. Selling at a later time can cause losses, although this may be a loss of earlier gains.

Purchase price

When determining whether a stock is worth buying, the purchase price obviously plays an important role. But the only reason why the purchase price is a major factor, is that the purchase price equals the price of the share. If the share is in possession, the purchase price only determines whether you have made a profit or a loss. The purchase price should not have any influence on the decisions you make after the share has been bought.

Because people have emotions, it is hard not to take into account the purchase price. The purchase price is part of most investor decisions to sell a share. A loss is made when the price is below the purchase price. A profit is made when the price is above the purchase price. This is all there is. The choice should be made once you have determined whether the share price will rise or fall (the trend), not whether the price is above or below the purchase price.

Most investors still take the purchase price into account when deciding whether they want to hold or sell a share. This is the reason why investors often sell their profitable shares too early, and they hold on to the shares with losses. If the purchase price is not included in this decision, the emotion can be ignored. By asking the question whether the shares are worth buying, you can determine whether the share should be kept into possession. If a share is not worth buying, it is advisable to sell the shares.

Trends

A frequently heard market wisdom is that shares should be bought low and sold high. Unfortunately, these moments are difficult to define. In contrast, trends can be found easier, especially trends on the short term.

To determine whether the share price will rise or fall on the short term, you may want to look at the trend of a share. Trends can be determined in various ways, often by using technical analysis.

Technical analysis excludes the emotions that people (and most investors) control when making decisions. Technical analysis is based on the irrationality of the people. In short, if people see a line going up, they will think that the line continues to go up. They do not take into account the underlying share or the actual value of a company.

Technical analysis can be used at the decision points for buying or selling shares. But investors still are the ones making the decision to buy or sell shares. In most cases, at least...