When to Buy and Sell Stocks for Beginners

Photo from MHVFCU.com.

With people opening more credit card accounts than ever, everyone is looking for ways to earn more cash. Many more have started turning to the stock market. However, beginners often struggle with knowing when to sell their stock or how to make money. To take the mystery out of trading stock, here are answers to some of the most important questions for beginner traders.

1. When you sell stock, who do you sell it to?
   • As the research site TheMuse.com puts it, when you sell stock, it is put on the market and sold to whoever buys it. This can be an individual, hedge fund, broker or any number of entities. Stock is sold automatically when you put it up for sell at the market price. So, if Nike stock is priced at $70 and you own a share, when you put it up for sell for $70, the market price, it will sell automatically. You don’t meet the person you’re trading with. Depending on the app, if you trade during regular business hours, the funds may be available for trading instantly. However, the funds will typically not be available for cash withdrawal for 24 — 48 business hours.
2. I know when to buy stock, but when do I sell it?
   • Although many new traders think they know when to buy, their buying habits actually make selling less profitable. As an example, sticking to Nike, if you buy the stock at $50 and it goes to $70, you make a $20 net profit or a roughly 28% profit. If Gerald buys it at $68 and it goes to $70, Gerald makes a $2 profit. As you see, buying at the right price is essential to selling for a profit.
   • That as the case, to know when to buy, check the 52-week high, 52-week low and current price. If the 52-week high is $70 and the 52-week low is $30, $40 is a reasonable price to pay for it. There is a potential to make a $30 profit per share if the price goes to $70.
   • However, if the 52-week high is $70 and the 52-week low is $30, buying the stock at $64 is not a smart investment (unless you have some reason to believe the stock price will soar above its 52-week high of $70). If Gerald buys it at $64, your potential profit is just $6, if the price does not soar above $70. Even if it does, you make the better profit buying it at $40 than Gerald did at $64. Now, with that figured out, you’re ready to sell.
   • Some experienced traders sell based on a targeted percentage. As an example, many traders will sell when their stock earns more than 20%. So, if they invested $100 in one share of stock, they would sell it when it reaches $120, a 20% profit. Many do this to avoid losing money through greed. Traders understand how quickly the market can change, so they set a target of 20% and get out. They don’t worry about the money they “could have made” because they know they could have made less.
   • Depending on your goals, set your intended selling point percentage before buying. What reasonable percentage would you be comfortable with? Investors.com recommends taking a 20 — 25% profit to grow your portfolio. So, if you buy a share of stock for $100, you should be looking to sell when the price reaches $120 — 125.
3. How do I make money when stocks only pay a few dollars in profit?
   • The stock market is about volume and pricing. If you buy one share of stock for $4 and get $12 back, you made only $8 profit. If you buy 25 of them at $4 each, you spend $100. When you sell them for $12, you make a net profit of $200.
   • If you want to make what some would consider good money, you have to invest a little more to get a little more back. Or you have to optimize your investments to choose only those that will grow exponentially.
4. How expensive is it to get into the stock market?
   • You can buy shares of stock for as little as a few cents (penny stock like TWG. TWG is not being endorsed here) to thousands of dollars (like NVR). Some reasonably-priced stocks trade between $5 and $400. The choice is yours.
5. How do I choose which stocks to buy?
   • Check the stock’s one-year performance to see if it is up or down and by how much. Ideally, you want the one-year chart price to be up over the last 52 weeks.
   • Evaluate the direction in which the one-year chart is trending. You want an upward trending chart and not a downward trending chart.
   • Check the 52-week high, 52-week low and current price. You want the current price to be nearer the 52-week low than the 52-week high for more potential profit.
   • Before buying, what percentage do you want to sell at? Look at the highest peak on the one-year chart. Based off the one-year chart, when is the best time to sell? Take notes.
   • Buy (or don’t buy) the stock.
6. What app should I trade with?
   • There are dozens of apps to trade with, but Robinhood, Fidelity and WeBull are some of the most popular ones. Yahoo!finance lists some of these apps on their list of 8 best brokerage apps. Additionally, your bank probably has a brokerage as well, so you can open an account with them.

The Takeaway

Many more Americans are drowning in credit card debt and are now turning to the stock market. While some make money, others give up in the beginning. This is because they don’t know when to sell. They also don’t know when to buy. The lower the buying price, the higher the potential profit, depending on the company. I have an upcoming book that answers these questions in-depth with pictures and real-life examples. It is for anyone interested in learning the art of buying and selling stock, explained step-by-step. I wrote it for those who have taken the steps of starting to trade and just need a little guidance to take it to the next level. I wrote it for you.

This article was written by Jermaine Reed, MFA, the Editor-in-Chief of The Reeders Block. Join the email list to get notifications on new blog posts and books. Join Jermaine in the new Bigger Me 💪 Discord for more personal growth tips. This article is 100% human-written. And remember, if you see an error, that’s what makes us human.