Successful financial trading is all about timing, and traders need to know with certainty the right times to buy and sell stocks and shares across their portfolio. In particular, selling shares at the wrong time can suppress returns, exacerbate losses and generally contribute to poor performance. As a result, there is a premium on knowing when best to sell your stocks, for any number of reasons, to the benefit of your account. With reference to market and fundamental analysis, you should sell stocks generally when you envisage a positive market turning negative. However, there are a number of different potential sale signals you should look to identify when running your account in order to protect your capital and maximise your returns.

When The Market Reverses

Market reversals are always a good sign to sell, and as soon as a trend looks to be on the brink of reversing, closing out is advised to lock in profits or prevent further losses. If you feel less confident proactively interpreting the point of reversal, waiting for the markets to show a pronounced move in the opposite direction might cost you money, but can help offset the risks of jumping on a false signal. The trick is not to allow reversals too long a time-frame to manifest – if a market looks like it’s taking a wobble, this can be a good indicator that you should safeguard your investment and close out your position.

When The Future Outlook Becomes Pessimistic

Pessimistic markets are usually downwards trending, because traders by definition feel downbeat about the prospects for that market and the relevant share prices in the future. Whether it’s a result of economic problems, regulatory issues or market threats, when news breaks that could shed pessimism onto a market, many traders will look to sell their shares and maximise their take from the transaction. Remember that markets move in herds, so when there’s bad news on the horizon it can usually be taken as a safe signal to think about selling your shares and liquidising your exposure to that market.

When Taking Your Profit

Selling shares is also the mechanism by which profits are made in long trades, and there will come a time in every long transaction where a traders needs to sell in order to take the profit. Choosing when to take the profit is another matter entirely, and one to which there are many different answers depending on the strategy and trading techniques you’re looking to deploy. Perhaps most importantly, profitable positions should be held for as long as possible until there is some other factor that would suggest selling to be a good idea. That way, the profits tied up in the position can be maximised and withdrawn in the one sell order, which makes for more efficient, more profitable share trading.

When Limiting Your Losses

In a similar vein, if a long position isn’t working out it’s always a good idea to sell your stake as quickly as possible, with a view to moving on to research alternative investment opportunities. In any form of financial trading, allowing yourself to get on the wrong side of a market trend is effectively capital suicide, and so it’s generally considered best practice to cut your losses early by selling off any shares that you don’t think are going to make it. There’s no shame in being this ruthless – it is in fact an important element of trading successfully for a profit, and should be encouraged as the first solution whenever traders feel uncertain about the future of a trade.