The New Sell and Sell Short: How to Take Profits, Cut Losses, and Benefit from Price Declines, Expanded Second Edition

PART TWO QUESTIONS

HOW TO SELL

You have bought a stock, and now it shows a profit. Now you need to decide when is the right time to sell your position and convert paper profits into real money. Should you sell right now, and take your money off the table? Should you let your trade ride and maybe make more money later? What if you let your trade ride but the stock reverses and your profits melt away?

Selling—the essential step of taking profits or cutting losses—must be done in a serious and businesslike manner. You need to know how to set profit targets for the stocks you buy. You need to know how to set protective stops.There is no guarantee that the stock you bought will go up, which is why you need to decide when to dump it; this decision must be made before you get into a trade. You need to know how to set protective stops.

After buying a stock, you need to bracket it with profit-taking and stop-loss orders. You have to be prepared to adjust both with the passage of time. You also need to decide whether to sell your entire position at once or take partial profits and let the rest of the position ride.

As you work through the questions in this section, please be sure to link every answer to your own experiences as a trader. Keep referring to your diary, which you should be keeping by now. Selling is the longest part of this Study Guide, with the largest number of questions. The topic is so important that you must make sure you earn a high score, taking and retaking this ...