How to Sell Stocks: A Guide for Beginners

Apr 29, 2022

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Much attention is paid to purchasing shares. Investors tend to put less effort into selling them. It’s a mistake as the sale is where the money is earned. Being able to do it correctly is crucial to claim your gains or, in some instances, even reduce your losses.

How to Sell Stock

steps for selling stocks

1. When is the best time to sell stocks?

The time you sell depends on your investment method, investment timeline, and risk tolerance.

There are good as well as bad reasons to sell stocks. Sometimes, loss aversion and even fear are a hindrance. Make sure you are in the right mood before pulling the trigger.

Instantly low performance in relation to the competition, unreliable management, and leadership decisions that you aren’t a fan of could appear on the list of valid reasons. Perhaps you’ve determined that your money will be better in another place, or maybe you’re making a loss to make up for gains that you’ll have to pay income tax.

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The most common reasons for bad behavior are an immediate reaction to changes in the stock market or unforeseen announcements from companies. Refusing to bail when things go south can only result in losses and is not the direction of what you’re looking for. Before selling, take a look at what you were looking for when you bought the stock initially. (You are familiar with the phrase”Buy low sell high.) did you think about what events or situations could have you decide to sell the stock? Examine your rationale to ensure that you’re not engaging in an emotional reaction that you may regret later.

Prone to emotional investing? You could be a great candidate for the Robo-advisor.

Read Also

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2. Select the type of order

If you’re comfortable with purchasing stock, you’re probably comfortable selling it. The choices for ordering types are similar. However, the goal is different. You employ order types to reduce expenses associated with buying stocks. When you sell the stock, the primary goal is to minimize losses and increase returns.

Order types

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Let’s take a look at some examples. Imagine you have a share that is currently trading at a price of $40.

Market order

The order will be executed at market prices in just a few seconds. Stock prices may fluctuate during the time required to complete and place the order. It is possible to sell the stock for around $40 less, slightly more or less.

The risk is that your stock could be sold at any time and without limitations.

Limit order

You can set a limit price, and the order will be executed only when the stock price is at or above the limit price. If the limit order is placed at $41, the order will only be executed when the stock is trading at or above $41.

The danger is that you could end up with no sales if your stock doesn’t rise to your limit.

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Stop-loss order

You decide on a price for a stop, and your order will be executed only if your stock starts trading below or at the price. For example, if your limit price was $38, your purchase will be executed as a market order when the stock price drops by $38 or lower.

The danger is that you could sell your home for less than the limit price, since there’s no floor. A temporary decrease in price could result in a sale, even though you don’t intend for it to happen.

Stop-limit order

You can set both an initial price as well as a limit price. When your price for your stop is $39 while your limit is $37, the order will be executed as a limit order at or above $37 if the stock price drops to $39.

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The risk: You’ve set an area for a floor, but if the stock falls below it too fast, which is possible in a volatile market, the stock could not be sold.

3. Fill in The Trade Form

If you’re selling via an intermediary, the broker’s website or trading platform will include an order form or trade ticket you’ll need to fill in to start the sale. In most cases and with many brokers, the transaction will be settled, which means that the proceeds generated from the sale will arrive in your account within two business days of the order’s execution date.

Inputting the information on the trade order is easy. It’s as simple as selecting sell. Enter your stock’s symbol, the number of shares, the type of order (limits or stop prices if necessary), and the date of expiration of your order which is basically how long the order can be open.

The options for time-in-force depend on the type of order you have. The most common choices include:

  • Day: The trade will end and will expire if it’s not filled by the closing of the Market. This is usually the default.
  • Good-Til Cancelled: The order continues to be active until it is filled or canceled. However, brokers usually limit customers’ time to keep the GTC request open.
  • Immediate or cancel: An order that has to be completed immediately. If not, the order or any part of it that is not filled will be canceled.
  • Fill or kill: It is typically employed when trading many shares. If the entire transaction isn’t completed within a short time, the transaction will be canceled.
  • Market open: Fills at the Market’s opening price.
  • Close Market: Fills at the Market’s closing price.

In most cases, it’s okay to leave your default selection for the day in this case. As you become more comfortable with trading stocks, you can explore your options.

After you’ve completed all fields, take a second look before hitting submit you don’t want to accidentally sell Apple while you intended to sell Applebee’s.

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