Wisdom Wise

How To Overcome A Premature Sale

Ben Gan
Publish date: Mon, 19 Aug 2013, 11:46 AM
Ben Gan
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While it's difficult to buy at the bottom, it is even more difficult to sell at the top. Many people make the mistake of selling prematurely. This means that before the stock moves up to its overvalued level or even to its fair-value level, the stock is sold. How often have you heard your friends said, " After I sold out the stock shot up." 

This mistake of premature selling is made mostly by people who have no knowledge in technical analysis (TA), and have no knowledge about the fundamental aspects of the company behind the stock as well. 

Normally they buy on a tip or on rumors.  As soon as the stock rises and rises more, they are increasing scare to lose back their gains. So their concern then, is to protect their profits. This make them sell the stock when it dips a little even in the early stages of an uptrend. Actually, they should me buying more at that time. When you are able to overcome  this weakness of selling too early, your profits will be greatly enhanced. 

Price of a stock never moves up in a straight line. It always moves up and down, and up and down. As it moves up, you will see higher highs and higher lows. But when it's in a downtrend, you will see lower highs and lower lows. You cannot see this unless you look at the chart of the stock.

In the stock market, you will do well to remember that it is profitable to follow strength, and never to buy in a downtrend. Thus the saying, " Never Catch a Falling Dagger."

To overcome the weakness of a premature sale, you must know TA, and have a good knowledge of the stock involved, otherwise you will never be able to hold on to it as the price rises.

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Discussions
5 people like this. Showing 3 of 3 comments

Micheal Teo

My profound thanks to you Mr. Ben Gan for sharing informative news on Bursa investment. Since I know nothing on TA usually I invest purely based on FA. More often than not each time I sell my shares the price move higher n higher. Since I m a pensioner I invest to earn passive income. Ur article give me a better insight on bursa investment.

2013-08-19 18:29

Siva68

Interestingly true. Very often than not we do sell prematurely b4 peak levels. Like to know any basic tips on how you do a TA?

2013-10-12 12:02

ProfitMan

Ben is right. Most people buy but don't sell to lock in profits. And TA helps. Some people have a pre-set profit objective when they buy a share like they will sell once the price advance 20% or 30% and they do not look back if the price shoots up further. Or another technique would be to sell when there is a 5% to 10% reversal from the high price that the share hit. And there may be many other selling techniques out there. It all depends on your own risk profile and your trading strategy.

2013-10-12 16:10

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