How to Know When to Sell a Stock

Keep track of the stocks you own.
i Jupiterimages/BananaStock/Getty Images

Buying a stock is easy. Knowing when to sell is the hard part. If you own stocks that are skyrocketing in price, you don't want to sell too early and miss out on potential gains. But you also don't want to hold onto the stock so long that its price drops again and you miss out. Keep an eye on each of the companies in which you own stock so that you get a feel for when it's time to sell.

Step 1

Think back on what made you buy the stock in the first place and see if those reasons are still valid. For example, you might have purchased stock in a company because it produced a gadget you thought would be incredibly popular, causing the company to thrive. Or maybe you felt the company outshone its competitors.

Step 2

Look at the company closely. A change in a company's management or finances can signal that it's time to sell, according to For example, it might be a bad sign if a company stops earning as much as it did in the past. also notes that it might be a bad sign if the company has cash flow issues or if it has more inventory than sales.

Step 3

Compare the stock's price to the company's health. It's possible that a company's stock price will skyrocket based on speculation alone, according to Ideally, the stock's price increases at about the same rate that its earnings increase. If a company's earnings don't keep up with the price of the stock, the price might drop pretty quickly.

Step 4

Consider the price of the stock. You might sell a stock because it's price has risen dramatically, even if you think the stock can continue to increase. If your stock drops and doesn't climb back up, even when the rest of the market does, you might want to cut your losses and sell as well.

the nest