This question is almost as hard to answer as when to buy a stock.  The theory of how to make money in the stock market is very simple. Buy low, Sell high.  Simple.  But at what price is a stock High and, at what price is a stock Low??

Everyone who understands stock trading will tell you that trying to time the market is a FOOL’s game.  There is also another very true saying in trading.  Bulls and Bears make money, but Pigs get slaughtered.  That one is definitely true. Warren Buffet has a saying as well.  “I made most of my money selling too soon”.  I remember that one every time I a sell a stock that I think is peaking, only to have it go up by 40% the next day.

What then is the right approach??  I set profit margin limits.  A 20% and 40% profit limit and a 10% loss limit.  Do I stick to them religiously, NO.  But I should.  I am pretty good at sticking to the profit levels, but the loss level, I am not so good at.  I keep thinking it might come back up.  And nobody likes loosing money.

I find that there are 3 simple indicators that can be reasonably accurate for telling if a stock is going down. The RSI (Relative Strength Index), the MFI (Money flowing In), and the Accumulation/Distribution indicator. That one tells you if the stock is mostly being accumulated (bought) or distributed (sold).  If all three of these are going down, you may need to dig deeper into why.  Itis often the first sign that a stock is going down.

How I use the profit levels is simple. If I hit the first level I really keep a watch on that stock.  If I hit the second level I place a “STOP LIMIT” sell.  If it drops to my trigger level it goes up for sale.  If it drops below my limit price it is no longer for sale and reevaluate what I should do.

I have been studying the market and doing research for over 20 years.  I have yet to come across anything that is a fool proof system for knowing when to sell a Stock. The same goes for Buying a stock.  The way I look at is: if I made money it was a successful investment.

Happy investing.