While there’s an abundance of information on buying stocks, many investors give far less attention to how and when to sell them. This is a mistake, as the sale is when you realize your profits—or, in some cases, minimize your losses. Selling stock involves placing an order with your broker. You’ll complete an order form specifying which stock you want to sell, whether you’d like to sell in shares or dollars, the quantity you wish to sell, and whether you prefer a market or limit order. Getting these details right is crucial to optimizing your returns.

1. Timing Your Exit: Knowing When to Sell Stocks

When to sell depends on your investment timeline, strategy, and risk tolerance. However, emotions like loss aversion and fear can sometimes cloud judgment. It’s important to distinguish between good and bad reasons for selling stocks. Before making a decision, check your emotions to ensure it’s the right move.

Good reasons to sell include consistently poor performance compared to competitors, poor leadership, or management decisions you don’t agree with. You may also decide to sell if you believe your money would be better invested elsewhere or if you’re harvesting losses to offset gains and reduce your tax liability.

Bad reasons to sell often stem from reacting impulsively to short-term market fluctuations or one-time company news. Selling during a dip locks in your losses, which goes against the principle of buying low and selling high. Before deciding to sell, revisit your original reasoning for purchasing the stock. Did you consider the conditions or news that would trigger a sale? Reflect on your reasoning to ensure you’re not making an emotional decision that you may later regret.

2. Choosing the Right Order Type for Your Stock Trade

If you’re comfortable with buying stocks, selling them will feel similar, as the order types available are the same. However, the goal differs: with purchases, you aim to minimize costs, while with sales, your focus is on limiting losses and maximizing returns. Let’s consider an example: Suppose you have a stock with a current market price of $40.

Limit order

When you set a limit price, your order will only be executed if the stock reaches or exceeds that price. For example, if you set a limit order at $41, the order will only be filled if the stock price hits $41 or higher. The downside is that if the stock price doesn’t reach your limit, your order won’t be executed, and you may miss the opportunity to sell.

Market order

A market order will execute almost immediately at the current market price. The price you sell at could be $40, slightly higher, or lower, as stock prices can fluctuate between the time you place the order and when it’s executed. The risk here is that your stock could be sold at any price, with no limits or restrictions.

Stop-loss order

With a stop order, you set a stop price, and your order will only be triggered if the stock begins trading at or below that price. For example, if the stop price is set to $38. the order will execute as a market order once the stock price reaches $38 or lower. The risk is that you could end up selling for a price lower than your stop price, as there is no guaranteed minimum. Additionally, a temporary drop in price could trigger a sale when you may not want it to.

Stop-limit order

With a stop-limit order, you designate a stop price as well as a limit price. FOr example, if the stop price is set to $39 and limit price to $37, the order will trigger once the stock’s bid price hits $39, and it will only be executed at $37 or higher. The risk is that while you’ve set a floor, if the stock price falls below that limit too quickly—especially in a volatile market—you might not be able to sell at all.

3. Completing Your Trade: How to Fill Out a Trade Ticket

When selling through a broker, you’ll need to complete a trade ticket or order form on their website or trading platform to initiate the sale. Typically, the trade will settle—meaning the proceeds from the sale will appear in your account—within two business days after the order is executed. Filling out the trade ticket is a simple process: you’ll choose “sell,” enter the stock symbol, specify the number of shares, select your order type (and limit or stop price if relevant), and define the “time in force,” which determines how long the order will remain active.

Your time-in-force options vary depending on the order type, but some common choices include:

• Day: The order expires if it’s not filled by market close. This is usually the default setting.
• Good-Til-Cancelled: The order stays active until it is either filled or canceled, though brokers often impose limits on how long a GTC order can remain open.
• Immediate or cancel: The order must be filled right away. Any portion not filled will be canceled.
• Fill or Kill: Often used for large orders, this requires the entire order to be filled immediately; if it’s not, the entire trade is canceled.
• On the Open: The order is filled at the market’s opening price.
• On the Close: The order is filled at the market’s closing price.

In most cases, it’s perfectly fine to stick with the default “day” option. As you gain more experience with stock trading, you can start exploring other time-in-force options. Once you’ve completed all the fields, review the entire trade ticket one last time before submitting. This ensures you don’t make any mistakes, like accidentally selling Apple when you meant to sell Applebee’s.