How To Sell Stocks: When To Take Profits | Learn How To Invest: IBD

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figuring out when to let go of a stock could be a tough decision to make and

there are basically two types of selling defensive selling to cut your losses and

offensive selling to protect your profits we've already gone over the

basics of defensive selling which says to cut your losses at no more than seven

to eight percent now let's take a look at a key offensive sell rule take most

of your profits when the stock has risen twenty to twenty-five percent from a buy

point this profit-taking zone is based on a stock's ideal buy point which may

be different from your own purchase price so if you bought a stock 2% past

its buy point for example then your actual profit would be 18 to 23 percent

if you followed this rule why 20 to 25 percent as a general benchmark because

history has shown us that stocks often pull back to form a new base after

reaching that level so rather than giving back those gains in hopes that

the stock will bounce back you can proactively lock them in using the sell

rule capturing a string of these types of gains can help you build large

overall profits without the risk of pinning all your hopes on one particular

stock in other words the odds are better if you reinvest your money and get 20 to

25 percent gain out of three different stocks then try to get a hundred percent

profit out of a single stock home decor retailer At Home Group is a good example

of how and why this rule works in April of 2018 the stock cleared a 34.02 buy

point At Home continued to edge higher over the next several weeks and then it

did what many stocks do after gaining 20% from a breakout it began to retreat

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