In this article, we will discuss the best way to sell your stocks and will divide it into subsections with a brief description of each.
Types of Sell Orders
The easiest way to sell stocks comes from what is called a “sell order.” Once you know you will place a sell order, you should decide what type of sell order you want to place. The main types of sell orders are as follows:
1. Market Orders: These orders are sold almost immediately at the current market price. The advantage is that the orders are executed as quickly as possible. The downside is that you have to accept the lowest selling price currently available in the market.
2. Limit Orders: These orders set a minimum acceptable price, and the stocks will only sell if buyers’ offers meet this price (or exceed it). The advantage is that the seller has a greater guarantee about the price they will receive. The downside is that your request may get queued up behind a long line of pending orders.
3. Stop Orders: These orders will sell the stocks only if the price drops to the level set by the seller. The advantage is that they act as a sort of insurance against the stock’s value decreasing – your position will automatically sell once it hits the stop price, executed as a market order. The downside is that these orders are usually placed with concerns about the worst-case scenario, so if a stop order is triggered, you will receive the next available price when the stock may have been volatile. A stop-limit order executes a limit order once it reaches the stop price, but it does not guarantee execution if prices drop below the limit you set.
Using an App
If you are already comfortable using mobile apps (and if you are reading this on your phone now), a trading app might be the best way for you to sell stocks. Beginner traders especially enjoy playing the market this way, as many investment apps do not charge commissions on trades. Some apps are offered by relatively new financial companies like Robinhood, while traditional brokerages also offer their own trading apps. Each app operates somewhat differently, but the simplest designs will allow you to sell stocks with just a few clicks. Betterment has also found success as an app-based method for buying and selling a predetermined portfolio of stocks.
Working with a Financial Advisor
If you bought stocks through a financial advisor, either in person or over the phone, you can also sell stocks this way. The financial advisor typically executes a sell order within 24 hours. Note that in this case, you must speak directly to your broker or submit your request in writing. As Investopedia states, “financial institutions will not accept trading requests via email or voicemail because they can easily be missed.”
Not Timing the Market
Knowing how to sell stocks is one thing, but how do you know when it’s time to sell? The correct answers to this question vary, but let’s start with one of the stock selling techniques that many view with suspicion: market timing.
Simply put, market timing relies on the theory that you can buy and sell stocks successfully by predicting their future movements. In some ways, it resembles the work done in mortgage interest and betting on the perfect time to lock in an interest rate.
Most experts believe that market timing is just a gamble because, even in the digital world of investing, there is no set of calculations that can tell you when you should buy and when you should sell a specific stock. It seems that tea leaves may be almost as accurate in predicting market movements.
If
You managed to time your entry just right, which is great for you! However, think carefully before you sell based on similar hopes of good luck. Many sellers find it better to set a target price rather than a specific timing. You don’t have to formalize that into a sell order – it can simply be jotting down your thoughts on a sticky note on your work desk. For example, you might have bought a stock at $20 per share and set a target to sell when it reaches $30 per share.
The Magic Sell Number: 16.5
This number does not refer to real magic nor does it indicate any secret rules on Wall Street. It instead refers to what is known as “future GAAP weakness.” “GAAP” stands for “Generally Accepted Accounting Principles,” which is a financial standard used by public companies.
The 16.5 strategy works as follows: If you take the earnings per share (EPS) of a company, as defined by GAAP, and multiply it by 16.5, you get a target sell price for yourself. So, if Carlozo Motors has an EPS of $10, your target sell price would be $165.00.
This formula is based on a 40-year average for securities, and since the late 19th century, the best stock sell points have approximately aligned with the lines of this equation.
Conclusion
With all the different ways to buy and sell stocks, the barriers to entry into the investing world have never been lower. If you’re unsure about whether you should sell a stock, or if you’re not certain when you should sell it, you can always choose to sit back and wait. You should not feel any obligation to sell a stock, and holding a position for a prolonged period can be a great investment strategy. This is known as “buy and hold,” and it is favored by billionaires like Warren Buffett and Charles Brandis. When you finally decide to sell, you’ll know how to execute the order with just a few clicks or taps or conversations.
Frequently Asked Questions (FAQs)
When should you sell a stock at a loss? Traders may decide to sell stocks at a loss when they feel that a support level has been broken. The support line they draw will dictate their strategy, and once this support line has been broken, the trader’s idea may have been invalidated, and it may be time to cut their losses. Of course, those using a “buy and hold” strategy will keep holding the stocks, regardless of any support levels that have been broken.
How can you sell stocks without a broker? The easiest and most common way to buy and sell stocks is through a broker, but this is not necessarily the only way. You can trade stocks without a broker through direct stock purchase plans with companies. For example, instead of buying a Home Depot stock through a broker, you can do so directly from the company itself. These direct plans may come with additional fees that brokers do not charge, so be sure to understand the fee structure before opting for a brokerage alternative.
Source: https://www.thebalancemoney.com/how-to-sell-your-stocks-4135611
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