When to Sell a Stock That You Really Love

financial banker at work

Investing online when emotions are high can have devastating consequences. You know the signs are pointing down, yet you can’t find it in yourself to sell your favorite stock. What do you do?

The best way to combat emotions while trading is to have a list of rules. Many traders argue that the hardest part about investing in the stock market isn’t buying the stock, but selling it. When you get emotionally attached to a position, the longer you hold it the harder it will be to let it go.

To combat this and let go, follow these simple steps.

1. Separate yourself from the position.

Imagine the stock as any random company with ticker xyz or cba, it doesn’t matter. You need to get the attachment out of your head that this stock is special and unique.

2. Take a good hard look at the facts.

Ask yourself, “Knowing what I know now, would I still buy this stock today?” Once you review the fundamentals and technicals again, you’ll see things a little clearer, having separated yourself emotionally,.

3. Acknowledge the worst.

You need to mentally acknowledge the fact that this stock is no longer a stock you should hold and needs to be removed from your portfolio.

4. Sell the stock immediately.

As soon as you understand what needs to be done, do it! Don’t sit around and wait because your mind will try and reverse your thinking. Hesitation is for the weak, but you are strong!

5. Drink a cold one and reflect.

Now that you’ve done the unthinkable and sold your once favorite stock, reward yourself with a beer, lemonade, glass of water, whatever. Think about what you did and how it will benefit you in the long haul and be proud of yourself for staying disciplined.

6. Find the next big winner.

With your freed up cash and freed up mind, start your search for your next big winner.

Post the rules somewhere on your wall, desk, or monitor so that you see them every day. When you run into that situation next time, simply refer to your rules and you’ll be amazed at how calm you remain. Why? Because you have a plan of attack.