It’s hard to know when to sell a stock. You don’t want to sell it at a loss, but you don’t want to hold on to it for too long or your losses could get bigger.
The smart move is to sell before things get really bad.
Here are six signs it’s time to sell a stock:
1. The Price Drops 10% to 15% From a Recent High
This is a clear indication the stock price has peaked. It may also mean the stock was overvalued. Set a stop loss order around 10% below a high.
2. A Sector of the Economy is Experiencing Volatility
If there’s an across-the-board price drop in companies of a particular sector, like technology, sell your stock before it gets dragged down with the rest of the sector.
3. Executives Are Selling Their Stock
Are executives selling stock in a company they work for? Expect the share price to drop in the near future.
4. The Company Cuts or Suspends Dividends
Profitable companies make dividend payments. In tough times, dividends are cut or suspended. A stock price fall will follow.
5. Multiple Analysts Downgrade The Stock
When multiple analysts downgrade a stock and recommend you sell, pay attention. That’s usually a sign the stock is in choppy waters. If analysts downgrade more frequently, sell.
6. The Stock is Being Shorted
Shorting a stock is an advanced strategy used by experienced traders and investors when they are speculating a share price will fall.
If a stock you own is being widely shorted, watch out.