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Don't let your gains become losses, use an exit strategy

by , 18 August 2015

Buying shares is an easy thing for most investors to do. The really hard part is selling.

Not selling out of stocks means you can potentially turn a profitable investment into a losing one.

So when should you sell your stocks?

You need to follow an exit strategy.

Read on to find out more…

How to know when it’s time to sell your stocks

When you invest, you do so with the goal of making money. You want to see share prices rising over time.

Do you have an exit strategy in place for the stocks you own? And, more importantly, do you stick to it?

Chances are when it comes to selling, you’re less eager than you were when you bought in the first place. But by not selling when your strategy tells you or by not having an exit strategy in place at all, you could lose money in your investments.

Two things make up a great investment: A great buy and a great sell, Dr Steve Sjuggerud in Daily Wealth explains.

The selling side of the equation is something many investors struggle with, which ultimately leads them to lose money.

What a good exit strategy entails

An exit strategy needs to do two things:

  1. Preserve your profits when a stock rises in price; and
  2. Cuts your losses.

Here are two exit strategies that will help you achieve both of these things…

Firstly, use a trailing stop loss. This will help you capture gains as a share price is trending upwards and protect your against large losses if the share price starts to fall.

And secondly, when a stock you buy is up more than 100%, sell half of your position. This means you’ve taken out your initial investment. The money you leave in is pure profit. Continue to apply your trailing stop loss.

Hanging onto a stock that’s ebbing lower isn’t how you should manage your investments. You must have an exit strategy in place and stick to it.

So there you have it. Don’t let your gains become losses, use an exit strategy.

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Don't let your gains become losses, use an exit strategy
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