Selling orders in the stock market are among the most important strategies you can employ at any time and in any situation. Indeed, they will ultimately determine the success or failure of a trade , and even quantify the potential profit you can gain from each equity transaction. Therefore, they must be based on careful consideration and not be the product of improvisation, as significant sums of money are at stake.
Furthermore, stock sales will determine the line between a good and a bad trade, and this will depend on many variables . These include not only financial market conditions but also your profile as a small or medium-sized investor. You will need to set objectives and, based on them, finalize the sale according to the perspectives established from the outset, without deviating from your goals.
If you don't want to regret your stock market investments, you must avoid making a bad sale at all costs. And in many cases, this stems from not knowing when to sell . In this regard, it's very practical to apply an old adage that the most experienced investors almost always follow with exquisite discipline and achieve better returns: "Let someone else take the last euro." Don't hesitate, heed this advice, because it will be very effective throughout your investing career.
Everything you shouldn't do
There are certain things you should never do in the stock market, as the effects on your bank account balance can be very negative, and you could even lose a significant portion of your wealth. You should especially avoid getting stuck in the markets at all costs . This is a fairly common scenario, where the prices of your investments are far removed from your purchase price. A change in trend, any unfavorable news, or an excessively negative economic environment can trigger it.
When these situations arise, you must remain calm and not panic. The effects could be even more negative. It 's certainly not advisable to finalize the sales, not even partially . Doing so will result in a disastrous sale, almost certainly costing you a significant amount of money. Under no circumstances should you allow the stock price to reach these levels. It would even be very useful to place a stop-loss order to protect your investment portfolio.
Another scenario where you should protect yourself is during sharp corrections in your stock price. Selling at such low prices is also unwise. While it's true they could still lose value in the financial markets, it's more likely that strong rebounds will occur, providing stability to the price . Nothing, least of all stocks, goes up or down forever. You should follow their price cycles. And never sell at the yearly lows.
Also, and even being in winning positions in the stock market, - if the value is in an upward trend - you should not exercise the sale in any way. You will be missing possible increases in its price that would lead you to increase your equity in a not excessively long period of time. And even more so, if it develops under a free upstream channel. Without a doubt the most favorable scenario for your interests as an investor.
Don't wait to sell your shares until the stock is in a downward trend that could drive prices to historic lows. A review of recent Spanish stock market history shows how several companies have exhibited this tendency. This has even meant the real possibility of losing all your savings, as in the cases of Terra, La Seda de Barcelona, and Sniace, among the most representative examples.
The main goal for small investors is to avoid these unpleasant situations, which can lead to distrust of the stock market and a long-term distrust. One lesson to be learned from these situations is that if you don't trust a company, it's best to refrain from investing in it . Otherwise, you might be forced to sell your shares in the least ethical way possible—that is, with substantial losses.
Periods of the year not to sell
Another strategy, this time less conventional, involves avoiding making a bad stock market trade based on the time of year. Yes, you read that right, by looking at the calendar. Although it might seem strange at first, some periods can be more favorable than others. For example, you shouldn't trade during the Christmas holidays . The reason is quite simple: these weeks regularly see what's known as the Christmas rally, with significant price increases in stock markets worldwide, almost without exception. It's not the right time to push for sales.
According to several studies by leading financial analysts, there is a time of year when the upward trend clearly prevails over the downward trend . This corresponds to the first and last quarters of the year. Given this scenario, which repeats itself many years, your best course of action should be to refrain from making any kind of sale during these periods, unless exceptionally significant events occur that trigger a transaction.
Finally, you shouldn't miss the opportunity when economic authorities implement measures to stimulate global growth (interest rate cuts, monetary policies, etc.). These measures are met with significant gains in the stock markets , which can even last for several trading sessions. These periods are also the most profitable for making your savings grow, as stock returns can soar to 10%, or even higher during periods of peak euphoria.
How to prevent a bad operation?
In many cases, these situations can be avoided, preventing a particularly sharp drop in stock prices. A very reliable method is to refrain from selling shares once they have broken through a resistance level . When this occurs—which is quite often—it's a clear sign that the upward trend will continue for the next few weeks, potentially leading to further price increases that could strengthen your portfolio.
Similarly, a trend reversal from bearish (or sideways) to bullish will be more than enough reason for you not to sell your shares. Not even if they're in positive territory, meaning you have unrealized gains. Unless you want to halt the momentum that will develop in the equity markets as a result of this significant shift in the overall price trend.
A truly original strategy for achieving these goals is to never sell shares in the days leading up to dividend payments . The reason for this unique investment strategy is that sales are rare in the markets during this period. And although the price is deducted on the day of payment, the stock usually recovers within a few days, making it an unfavorable time to sell.
What do these operations lead to?
The emergence of these scenarios creates serious problems that you will have to face, and the sooner the better. It will always be better to lose 2% or 3% of your invested capital than to lose half your savings in a stock market transaction , as has happened to some retail investors in recent years.
On the other hand, people who have greater assets to protect their investments will always have greater defenses. Not in vain, they will have time in their favor, since if the investment does not develop through the planned channels, they can always wait for the price of its value to recover the purchase price, and thus not suffer handicaps in its stock market operation.
Another potential consequence is that, faced with unexpected expenses (children's school fees, household bills, loan repayments, or simply an unforeseen payment), you may have to sell your purchased shares at a loss . This typically involves selling them at the lowest price point, and combined with your trading fees, will significantly reduce your equity portfolio.
To avoid this serious problem, you have two solutions you can use at any time. First, diversify your investments by carefully selecting four or five stocks to form a safe and secure portfolio. Under no circumstances should you rely on the performance of a single stock . That will always be a much riskier option.
Furthermore, by focusing your investment horizon on the medium and long term, you can best avoid any unwanted sales that might derail your initial plans to grow your savings, even with the option of receiving a high dividend every year , around 8%. You can then use this dividend to provide liquidity to your checking account, covering some of the most urgent expenses you'll face in the coming months.
If you pay attention to these tips, surely that from the next operation in the markets the probabilities for you to develop a bad operation will be significantly reduced.