The market is not always bullish, so there are times when traders would want to sell stocks to lock in some profit while the opportunity is taking place. After we discussed how to buy stocks online, now we’re sharing with you our beginners’ guide about selling stocks – why, when, and how.
Note that this post is about selling global stocks using a CFD broker. Meaning, you can sell stocks even if you don’t own the shares or the underlying assets. A trusted CFD broker allows investors and traders to trade international stocks.
Make sure you have read and understood the previous tutorials before you proceed with this one. In case you have missed the previous posts, no worries, here are the links:
- 3 Things You Should Have Before Investing in the Stock Market
- 5 Effective Strategies for Beginners in the Stock Market
- How to Buy Foreign Stocks Online and Earn Passive Income
Why Should You Sell Stocks?
The most common reason why we should sell stocks is to lock in profit. When traders and investors believe that the price of the stock has reached its optimal level, they usually sell shares of stock. Likewise, when they think that the bullish trend is over.
Selling a stock is also known as shorting in the trading world.
When Should You Sell Global Stocks?
More often, investors and traders find it easier when to buy stocks than when to sell stocks because of greed, lost focus, panic, and indecisive strategy. Below are the most helpful tips you should consider when you must sell international stocks:
- When the stock reached an awesome peak
- Recent bad news about the company
- When the stock is overvalued
- Major indices are down
When the stock reached an awesome peak
When a stock price suddenly reached a fantastic surge of 10% or more or it has achieved its new all-time-high, chances are it will correct itself back at some levels or would decline a bit of points to breathe. Many traders take that chance to short the stock. Be careful when shorting blue-chip stocks or those stocks with a solid fan base like Tesla.
Recent bad news about the company
Some disappointing news like when a company missed their earnings estimates, company scandals, and when analysts downgrade a stock into sell, traders open shorts for those stocks. Exit as quickly as possible and lock in your profit as the effect of bad news doesn’t stay much.
When the stock is overvalued
When the stock is too expensive, and when investors don’t find the stock to be fairly valued than its market price, they sell the stock in anticipation of a correction. Be careful when evaluating the intrinsic value of stocks, especially those large market cap companies, because their future value matters most to investors.
Major indices are down
For example, if you are trading US stocks and you already see major indices like S&P 500, NASDAQ 100, China 50, UK 100, Ger 30, Euro STOXX 50 are all in red before the market opens, it would likely be the same with most of the stocks throughout the day. Selling some shares quickly with little profit is attractive.
How to Sell Global Stocks Online?
- Monitor Your Chosen Stock
- Open a Short Position
- Set an Entry Price
- Apply a Stop Loss
- Set a Quick Target Price
- Repeat your Strategy
1. Monitor Your Chosen Stock
After adding some of your chosen companies to your watchlist, monitor your favorites. It helps to keep on track of their price movements and momentum. You can apply a price alert whenever the price of the stock skyrockets 10% or above and when it crossed more than its 52-week high. That’s a signal to consider before shorting a stock.
Many traders also use technical analysis tools and chart patterns before entering their sell position. One of the tools we like to use is the Simple Moving Average. We use MA50, MA150, and MA200.
When MA50 crosses below the MA150 and MA200, and the lines are above the candlesticks, there’s a probability that the price would fall. Also, when MA50 is above the chart, and there’s a downtrend, go with that trend very fast.
Crucial factors to consider before selling a stock are bad news, disappointing earnings, economic and political issues, a downgrade of target price by a notable analyst, and pandemic.
2. Open a Short Position
Opening a short position also means opening a sell trade. When a trader believes that a bearish trend would occur or the price of the stock would fall, they usually start shorting the stock. Opening a short position is easy to do. Select the stock or asset you want to sell and push the Trade button. Make sure you are on the SELL action.
3. Set an Entry Price
When shorting a stock, the entry price is more than the target price (TP). Remember that you are selling because you anticipate that the price of the stock will go down. It’s the opposite of what you would do when buying a stock.
4. Apply a Stop Loss
A stop loss is a trading feature designed to help traders avoid huge losses. For example, you don’t want to lose more than 50% of your invested money; you will set a stop loss of -50% to your trade position.
5. Set a Quick Target Price
Selling a stock is usually more challenging than buying a stock because when you’re shorting, it means you are going against the company’s goal to grow.
That’s why if you are a beginner, you must execute a quick trade when selling. Remember, shorting means shorting. So your exit must be quick to avoid the trouble of losing money.
6. Repeat your Strategy
After mastering and learning the skills on how to short stocks effectively, repeat your strategy whenever you find an excellent opportunity to sell. Always be careful and be more cautious with your short positions. Shorting requires trading skills so make sure you have mastered and learned your own strategy.
Disclaimer: This content is for information purposes only and should never be considered as professional advice. Every investor has different risk tolerance and goals. Always do your own research. All investments have risks. Risk only the money you’re not afraid to lose.