InvestorQ : Is the stock selling logic the same for traders and investors?
Swati Naik made post

Is the stock selling logic the same for traders and investors?

Answer
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Ria Roy answered.
2 years ago


Actually, the selling rules will differ for a trader compared to an investor. Traders take a more short-term view of a stock while investors take a long-term view on the stock. Traders are basically in the stock market for the very short term. They try to buy a momentum stock at a reasonable price and exit the stock when there is an opportunity. The question is what impacts or influences their sale decision. For such traders, there are 2 critical levels that could trigger a sell decision. First, is the stop loss level! As a trader, you must never trade without a stop loss. It is the level at which you book loss and exit the position and is normally the technical support level of the stock. Your basic rule should be that the moment the stop loss is triggered you must simply exit your position. The second level is the profit booking level. As a trader, you must respect your stop loss levels and your profit booking levels. A smart trader is one who buys on expectations and sells on announcements.
An investor makes a more complex decision on when to sell as stock. For example, an investor will have to be convinced that the long-term prospects of the stock are not good enough or that there is a fundamental shift that justifies selling the stock. Alternatively, if the investor finds much more salivating opportunities in the market, they may choose to sell the stock.