Learn to Trade Stocks: 10-Minute Crash Course

Table of contents:

Learning to trade shares – but how? How should you proceed optimally? And what things do you have to pay attention to in order not to make costly mistakes?

In about 7 minutes I will show you the most important things you need to know.

One thing is clear: I can’t teach you every detail of finance and investment in seven minutes. Rather, it serves as a quick start and step-by-step plan to help you get further into the subject.

So, let’s get started: How can you learn to trade stocks from zero?

Learning to trade stocks: The basics

What are stocks anyway? Shares are company shares.

So by buying a share, you are holding a stake in a company that is listed on the stock exchange.

For putting your money into that share, you hope to be rewarded. That’s what we call a return.

This consists of 1. a possible increase in the share price and 2. a possible distribution of profits, the so-called dividend.

So the goal is clear: you want the highest possible return (share price increase + dividend) as “compensation” for lending your money and taking risks.

Where and how do you trade shares?

At the stock exchange, everyone comes together: Securities, buyers, sellers and many more parties. For us, however, only these are primarily relevant.

Shares are usually traded from investor to investor. This means: If you want to buy a share from a listed company, you buy it from another investor.

A price for this share is continuously determined on the stock exchange: The stock price.

At this price, you can buy the share and another investor can sell it to you.

There is also a spread between the buy and sell price, which is why the two prices are not 100% the same, but in the case of the much-traded shares of large companies, this spread is usually very small.

To be able to trade on the stock exchange, you need a securities account. Your securities are kept there. Similar to the way your cash is kept in your current account.

There are various brokers who offer this service. You should not open it at your house bank, as the fees are usually much too high. Pay attention to lower fees, a large offer, seriousness and comfort. You can find my recommendation here.

Through a broker you can open your account free of charge, deposit money and invest in shares.

And how do you do that best? We’ll clarify that now.

Do you even have to trade stocks?

When we talk about how you can learn to trade shares, we first have to clarify an important question of principle that many people are not even aware of.

Do you have to trade stocks at all?

“Sure. What else?” – …you might think…

Logical: To own a share, you must first buy it. Only then can you get a positive return at all.

But the difference lies in the sale!

Because: You do not have to sell the share. Do you know the Quandt family? They have been major shareholders in BMW for decades. They probably never think about selling their BMW shares – and yet they profit.

There can be several reasons why you should choose this unusual way.

Every trade causes fees with your broker. High fees hurt your return and are the most underestimated problem of most private investors

You have tax advantages and use the tax deferral effect. If you sell the stock, you have to tax the profits immediately. But if you hold it for a long time, you have to pay tax on it only when you sell it and therefore much later.

You have a financial security in your portfolio that can regularly distribute profits through dividends.

You have a significantly lower expenditure of time.

Studies show: the investors who trade less have a higher average net return.

So you see: You do not necessarily have to actively trade shares and sell them at short notice. You can also see yourself as a “buy-and-hold” investor and have a long-term perspective and use the advantages just mentioned.

Regardless of whether you focus more on short-term or long-term investments, the central question is: How do you invest in shares?

Where Do I Keep Securities?

If you want to buy shares or index funds (ETFs), you do not have to go to the branch bank to actually buy the securities and keep them in safekeeping later. You almost always pay fees there, which you can save yourself. It is better to open a free online custody account with a direct bank or a specialist securities dealer (online broker).

Do you already have experience with a securities account?

Then you can help!

Support other investors in choosing the right securities account by submitting your personal experience report.

We recommend either securities accounts where you pay very little to buy the shares or funds, or securities accounts at online banks where you can also get a cheap current account and a cheap credit card – in other words, all your banking transactions under one roof.

How To Read The Cost Statement Correctly

Orders for twelve fund units via the Xetra trading platform cost a flat rate of EUR 6.40. Of this, 3.90 euros goes to the bank, the rest to the Xetra trading platform.

From the note “Payment from third parties to the bank” you can conclude that the purchase actually costs the bank more, but that the ETF provider Lyxor will cover these costs for you as part of an action.

In order to track costs during the holding period, you need to know which cost positions exist at all. This total expense ratio, also known as the Total Expense Ratio or TER for short, can be found, for example, when you display the ETF overview page in the securities account. The TER includes the flat-rate fees charged by the ETF for administration, custodian bank and the production of investor information. It also includes VAT and other minor fees.

The Lyxor ETF in the example costs investors 0.3 percent of the investment amount per year. The cost over a one-year holding period for your invested capital is calculated as follows: 0.003 × 2,469 euros, equal to 7.40 euros. In addition, there are transaction fees within the fund of 0.02 percent: 0.0002 × 2,469 euros = 50 cents. This results in annual costs of 7.90 euros. Important: You do not pay these costs extra, they are directly included in the performance of the fund.

Finally, when you sell, you pay the bank’s regular fees and again the fee that goes to the Xetra trading platform.

How do you invest optimally in shares?

There are different ways to invest in shares. You can…

invest directly in shares of a company

buy shares in a mutual fund, which in turn invests your money in shares

buy so-called ETFs, which allow you to invest in several shares at once at a reasonable price

invest in securities that bet on a certain performance of a share (derivatives such as warrants, certificates, etc.)

In Germany the investment fund is the most popular method. At the same time I can only advise against it, because statistically 80% – 90% of investment funds do not manage to achieve a return above the average for the investor in the long run.

Also derivatives like warrants and certificates I cannot recommend to you as a beginner. In comparison, they are more complicated, less transparent and have higher risks.

Exciting are the direct investment in a share and the investment in an ETF, which provides a whole bundle of shares for you.

For example, by investing in an ETF on the DAX you can invest in the 30 largest German listed companies.

This allows you to invest cost-effectively in many shares at once with only one security. Thereby you reduce your single value risk, which you often have with single shares, enormously.

You see: There is not one way to invest in shares. So if you want to learn how to trade stocks, you should also know the indirect investment possibilities.

4 concepts in stock trading that you need to know

To learn how to trade or successfully invest in stocks, you need to understand 4 important concepts.

Without these concepts you will not be successful in the long run. And it does not matter whether you invest in shares or ETFs.

1 – Return is generated by risk

Why do some companies pay 5% interest p.a. to their capital providers, while others pay only 2% p.a.? Out of pure charity?

I don’t think so. There are two terms that cannot be separated on the stock market.

Risk and return.

To be more precise: return is generated by risk. If there were no compensation in the form of a higher return, nobody would invest in a riskier company.

Therefore, companies that are financially worse off have to pay higher interest rates to get money.

You don’t get a return for free – remember that! And even if the bakery next door offers you 12% interest on your money, there are reasons why. Nobody gives money away.

This concept is also very central to shares. But you have to pay attention to the risks you are rewarded for.

When we talk about equity risk, we are talking primarily about the risk of fluctuations in value. Your stock can rise, but it can also fall.

The more a stock fluctuates, the higher the risk and the higher (theoretically) your return.

But there is another risk: the single stock risk. But you are not rewarded for this – and that’s why you should eliminate it with Concept #2.

2 – Diversification is the key

If you invest your money in just one share, you take a high individual value risk: The risk that your company will go bankrupt.

This risk does not only exist on the stock exchange: many people own their own home, which accounts for about 90% of their assets.

If the situation worsens now because the nearby supermarket closes, a large company relocates its jobs, an airport is built, etc., the value of the home will fall. The assets decrease.

Sure, in most cases the home should not be sold, but it illustrates the concept: putting all your eggs in one basket is a high risk.

Therefore, you should also diversify when investing in stocks: Hold not just one but five, ten or even hundreds of stocks, e.g. cheaply through ETFs.

In this way you can eliminate your individual value risk and sleep peacefully.

3 – When theory fails

You can acquire a lot of knowledge. And so should you.

You can read books, attend seminars, read blogs like this one or get the best know-how exclusively in my email newsletter and video courses.

This is good and important if you want to avoid expensive learning on the stock market.

But putting this theoretical knowledge into practice is much more difficult.

You can say to yourself beforehand: “No matter what happens – if there is a stock market crash, I will not succumb to the herd instinct and sell my shares, but hold them until the prices rise again!

That’s a good and correct approach. But how do you react in practice when your stock portfolio is temporarily down 40%? Do you panic and sell?

How do you react when a single share of yours gains +100%? Do you get greedy and buy that stock blindly?

These are all questions that are difficult to answer in theory. And if you want to learn how to trade stocks, your own psyche is always part of the process in practice.

You have 3 central possibilities to prevent your own emotions when trading shares:

  1. Set clear rules from the outset (e.g.: at +50% profit I sell)
  2. Reduce your risk by investing in bonds, commodities, etc.
  3. Learning by doing: If you want to learn how to trade active shares, practical experience is essential.

Opening a sample portfolio is not one of them, by the way. With a model portfolio you only invest with play money, so the psychological situation is hardly comparable. A model portfolio is more like the board game Monopoly, but not a functioning investment in practice.

4 – Many roads lead to Rome

Many people tell you different things in the stock market.

One of them is the stock market’s top guru and is said to have the best stock tips every year. The other predicts a stock crash every year and when it happens, he lets himself be celebrated.

Some act daily, others are relaxed and long-term.

Some swear by technical analysis, which only looks at the price trend, others swear by fundamental analysis, which actually deals with the company behind the share.

The important thing is: There are many ways that can work for you.

Above all, you have to find the way that is right for you.

For example, I have neither the time nor the desire to follow stock prices for hours every day, so I invest for the long term. I also rely on the results of studies which show that about 90-95% of all day traders lose money.

Every person is different in terms of assets, time, willingness to take risks, investment horizon, experience etc. Therefore there is no miracle strategy that is optimal for everyone.

Find out what is important for you, what your goals are and with which methods you can achieve them.

You can invest passively and relaxed in ETFs. Or you can follow in the footsteps of Warren Buffett and pick stocks according to the criteria of value investing and invest in them.

Many roads lead to Rome. You just have to find the one that is best for you.

These 4 concepts clarify: Learning to trade stocks isn’t just about buying the right stocks.

It is much more about the fundamental knowledge to invest your money successfully in shares.

The successful investment is not a sprint, but a marathon. After all, you will deal with money all your life and always want to invest it well.

Learn to trade shares: The most important 10 things in summary

So let’s recap: What did you learn in that seven minute stock trading crash course?

  1. Shares are company shares.
  2. Shares are traded on the stock exchange and are valued at any time.
  3. The purchase of shares and other stock exchange traded securities is done exclusively through a suitable broker.
  4. You do not have to actively trade shares: The buy-and-hold strategy offers many attractive advantages.
  5. You can invest directly in individual shares or indirectly, for example through ETFs, in shares.
  6. Return comes from risk.
  7. Take advantage of diversification.
  8. The theory is not everything.
  9. There are many ways to be successful on the stock exchange. Find the right one for you.
  10. Use the six basic principles for wise investment success.

Stocks provide excellent returns. They are tangible assets that belong in your portfolio. Your chance to profit from the economic development and increase your money.

You want to learn how to trade stocks? Very good decision!

Take these 10 points as a step-by-step plan to successfully invest and increase your money in stocks.

What is stock trading?

In short, stock trading is comparable to a weekly market or a grocery store. There is someone who wants to sell a share in a company and this person meets interested customers on the stock market. The more customers are interested in a share of a company, the higher the price – because supply and demand decide.

Stock trading itself describes the buying and selling of shares. If one expands the term and uses the synonym stock exchange trading, then it is even clearer here that it can also go beyond trading in shares. In addition to shares, options, warrants, derivatives, bonds, ETFs, funds, etc. can also be traded on the stock exchange.

Differently than with a weekly market one does not buy however directly with the enterprise, but one needs the intermediary stockbroker (here also often broker is said). In the past, these were mainly the contacts at the branch bank, but nowadays trading also works through online banks and online brokers. For stock trading, a stock portfolio is necessary. The choice of the provider for trading has mainly to do with the personal preference, the offer of the provider and the prices and should always be made carefully. With the help of a stock portfolio you can buy and sell all stock exchange products such as shares or bonds.

What is a stock?

If you want to understand the trade with shares, you should of course also know what a share is. At school you didn’t learn this kind of thing in the past and therefore it is very difficult for many people to understand what is behind it. However, after a little explanation it is very easy.

In itself a share is a share in a company that is listed on the stock exchange. This is then called a stock corporation (AG). The capital of an AG is divided by the number of shares issued by the company and thus tradable on the stock exchange. Here there are usually millions of shares. Whoever owns a share is a so-called shareholder and thus co-owner of the company. As a shareholder, you are therefore also entitled to vote at the annual general meeting, which takes place once a year, and here you can also vote on sometimes important corporate issues.

Here is a small example to illustrate this:

123 Trading AG issues 50,000 shares, which are purchased by interested investors on the stock exchange. Max Tradingmann acquires 1,000 shares of 123 Trading AG. Max thus owns 2 percent of the entire company. If the business of 123 Trading AG goes well and more and more people want to invest in it, the value of Max’s shares will increase and he could make a certain profit by selling them.

How does share trading work?

For shares, prices are determined on a permanent basis to determine a value per share for buying and selling. The value changes, as described above, depending on supply and demand. The more profits a company makes or at least is considered to make, the more interesting the company is for investors. If then more traders want to buy shares of the company, the share price increases. If, on the other hand, a company is doing badly or is in a crisis, fewer investors will be interested and the value per share will fall.

If an investor wants to buy shares of a certain company, he places a buy order with his broker. Today, this works mostly digitally and can be done in real time. However, it is also possible to set a limit order so that one only buys at a certain lower share price. If the price falls below the limit, the order is executed. The same is true for the sale of shares with stop orders.

For special types of stock trading, however, this system can also look a little different. For example, the course of the stock trade changes in a short sale. You can find out what a short sale is in the article Short sales – earn money on falling prices.

Where are my shares stored?

In order to participate in stock exchange trading at all, a stock portfolio is necessary. This can be opened with many different providers. If you own a stock portfolio, you have the possibility to buy shares and other securities through one-time investments or savings plans and to sell them again. If a buy order is triggered, the shares are credited to the securities account and at the same time the money for the purchase is deducted from the deposited clearing account. You can keep as many shares as you like in the share depot and they can be stored there for an unlimited period of time. Share depots or individual shares can also be inherited.

If you want to sell a share from the depot, you create a sell order – either you can sell immediately or only when a certain price is reached up or down. If the corresponding security is then sold, it is removed from the stock portfolio and the sales amount is transferred to the clearing account.

However, it is important to note that almost all online banks and brokers charge order fees for buying and selling shares. These transaction costs must always be considered in your invoice. At the same time, depending on the amount of profits, taxes are also incurred.

How do you buy and sell shares yourself?

In the past, buying and selling was mainly possible by notifying the responsible bank advisor. Nowadays, however, this can be avoided and the purchase or sale of securities can be handled within a short time. Therefore, stock trading has become much more dynamic and faster. Whoever wants to buy a share simply places a buy order with his broker or online bank and depending on the type of buy order, the transaction is completed in seconds. With the sales it behaves likewise.

However, it is important to note that not every provider offers the same range of services for share trading. Thus there is with some offerer no possibility at all to buy shares of the desired enterprise. For this reason an offerer comparison is worthwhile itself again and again regarding the offered product range. If another broker or an on-line bank has the more suitable offer one does not have to change however immediately completely the depot, but can open simply a new depot with the other offerer. This is possible without limitation. However one should always throw a view of the costs. Especially if you have several depots at the same time, you should keep an overview of the costs. If these are too high, it costs return and that should be the actual goal.

Which costs with the share trade?

The costs with the share trade can turn out very differently and are always dependent on the respective offerer. Therefore one should inform oneself with the first opening of a share depot for the stock exchange trade in any case before over the different on-line banks and brokers and pay attention to the costs.

Some providers do not charge a fee for the stock account itself. Sometimes a current account with the direct bank is necessary or a certain number of trades per month or quarter must be carried out. Much more attention should therefore be paid to the order fees. These can differ massively. At Comdirect Bank, for example, it is 4.90 euros per buy/sell in the first 12 months, after that it is 9.90. At FlatEx, on the other hand, it is always 7 euros and at Trade Republic only 1 euro.

A comparison is therefore worthwhile. Nevertheless, you should always compare by price and performance. In our article about stock portfolios we have compared some providers and therefore recommend to have a look at them as well.

The most important basic rules for stock trading

If you want to make your stock trading successful, you should definitely pay attention to some basic rules. Because otherwise the desire for returns can quickly turn into a nightmare. In surveys, some Germans repeatedly state that they have already burnt their fingers when trading stocks and are therefore no longer interested. But that does not necessarily have to be the case if you pay attention to these rules. A steady profit is not yet guaranteed, but the probability of it increases.

1 – you only invest money that you can do without

Return comes from risk, and so the stock market world is certainly also associated with risks. Even the most successful company can be burdened by external effects such as economic crises, natural disasters or war and lose value. Then the money that was believed to be so safe may be worth less or in the worst case, virtually nothing more. But if this money is needed again, this can lead to bigger problems.

Therefore one should always invest only the money which one does not necessarily need for living and which one can do without in the worst case. We therefore recommend, like most stock market professionals, to keep 2 – 3 monthly salaries as a reserve on the overnight money account in any case.

Who plans larger expenditures, should likewise not put all money into the stock trade. Because otherwise the house, the apartment or the new car is fast again only a dream.

2 – you only buy what you understand

In the field of stock exchange and stock trading there are many different products in which one can invest. It must not only be shares, but perhaps also options and warrants, forex, bonds or commodities. In any case, the list is long. Likewise, one does not understand every trend or every business model. Therefore, it does not always make sense to follow every trend, buy penny stocks or trade heavily leveraged options.

In short: You should really only trade products that you understand. The same applies to the business model behind companies.

3 – diversification, diversification, diversification

There is hardly much more to say. You should never divide your money between just a few or even one company. Instead, it is advisable to spread the risk and pay attention to the titled diversification. In this way, when trading shares, you can very easily buy company shares from different industries and regions. If you have been in the business for a long time and have experience, you can also add foreign exchange or commodities to further increase the diversification. For inexperienced traders, rule number 2 applies in these areas.

4 – back and forth makes pockets empty

Instead of always pushing your money back and forth, selling when you make short-term profits and then buying it again, etc., you should make sure that you don’t always go back and forth too much. It makes also little sense to select always the most favorable offerer and if that changes its offer to pull immediately to the next broker. Here a certain long-term orientation is advantageous, especially for beginners. Because too much back and forth provides for a smaller net yield since order commissions or taxes result.

5 – limit losses, let profits run

Every investment strategy also includes risk management. That is why you should already think about the strategy and the appropriate handling of profits and losses before you start trading stocks. One should therefore really take care that one does not take every profit immediately and is annoyed afterwards about missed further increased profits. In the same way, one should not sit out every loss endlessly and hope for a turn-around, but rather limit profits from time to time. Depending on your own strategy, this can be defined very differently.

6 – remain realistic

The fast money through stock exchange trading is certainly the desire of everyone. But usually this remains rather a pipe dream, because the reality looks different. Of course you can make a real lucky strike here and there and suddenly make 400 to 500 percent with a share. With leveraged products such as options or futures even much more. And all this in such a short time. But that’s not exactly the norm and that’s why you should always be realistic.

It is simply not realistic to set a return target of several hundred percent per year. Instead, you should be satisfied with less and always try to be better than the market. Anyone who can do this has already achieved considerable success. And 6 to 8 percent is already an X-fold of current interest rates on overnight money or savings books.

Recommendations for successful stock trading

In addition to the basic rules, you can use various other aids and support options to trade stocks more successfully. To a few we want to refer here completely briefly.

Further training

In stock trading, as in professional life, lifelong learning applies. You can always continue to educate yourself and learn new things. That is why we recommend continuous training for traders of all experience levels. With us different learning offers are under the category Traden lernen.

Use signals and expertise of others

Reasonable stock trading sometimes takes a long time. Analyzing companies or interpreting trading signals correctly cannot be done by everyone with a limited time frame. Therefore, one should definitely use signal services. These are professionals who work with considerably more time and expertise and from whose knowledge one can profit enormously.

Using professional services sensibly

In addition to the signals, there are other tools and software that can be used to make your stock trading even more successful. Here are some offers and a look into the share finder or the quality score of AlleAktien can be worthwhile.

Test and practice strategies

As a matter of principle, you should always test new ideas and strategies before you put your real capital to work. Here, the variants of a sample portfolio or the participation in a stock exchange game are particularly recommended.

Sample portfolios

By sample depots one can test new strategies or test the learned knowledge of the further training very simply and at the same time very realistically. Which exactly a sample depot is and which are recommendable here, one can understand very well in the article sample depots – stock exchange trade without real money.

Stock exchange games

Stock exchange games offer another opportunity to practice with virtual money. One can not only test new knowledge without real loss (unfortunately also without real gains) and win prizes. The competitive character of most stock exchange games helps to stay on the ball. We discuss stock exchange games in the articles Planspiel Börse – spielerisch zum Börsenerfolg? and Börsenspiele im Überblick – was wird geboten? The stock exchange game of the Trading Masters could also be interesting.

Summary

In conclusion, one can say that the word stock trading is explained very easily and quickly. However, it is not enough to know that it is simply buying and selling company shares and similar products. Instead, one needs some further knowledge to be able to trade shares successfully. Therefore, you should in any case observe and apply our six basic rules of stock trading. Likewise one can and should always educate oneself further and use the expertise of professionals. This way you can achieve real stock market success in the long run and this should be the goal of stock market trading.

If you are new to stock trading, you should definitely take the opportunity of a sample portfolio or a stock exchange game to gain more personal experience.

Sell shares – 10 rules for more trading profit

Selling shares has to be learned. In the daily practice of online trading, one quickly realizes that the well-intentioned advice to “buy cheap and sell dear” is much more difficult to implement than it first sounds.

Because cheap or expensive is always relative when it comes to shares. So how to sell shares correctly is what we will talk about in this article.

+++Update on August 25th by Thomas Vittner…

This is about companies, investors and securities. This guide is not about real estate. It deals with the purchase of shares as well as the right broker. Of the own depot.

And we give 10 essential Tipps, how one maximizes its profits with on-line share purchase. Even if these tips – so much is already betrayed now – probably go into another direction than you will expect.

Realize profits or let them run?

When is enough? Or how much is enough? This question has occupied generations of traders on the stock market. And it has already driven many of them into pure despair.

Because the prospective trader has with this problem – like with so many other questions in the trading of shares – permanently the feeling to have made a wrong decision. Why? Let’s look further.

Taking profits ?

Now that our stock trade has gained a few percent after three days, it is time to think about taking profits. In addition, a quarterly report is due in two days for the XYZ share. The company’s profits are expected to be good, but competitors who have published their reports in the last few days have fallen well short of expectations. So is this a bad omen for our share?

Seemingly always wrong?

So one starts looking for what to do now. Close the stock position (even before the quarterly report)? Sell some of the shares?

Set a stop loss on the stock? Or simply close your eyes and go through? Will it go well? Which decision is top?

At the end of the day you think that you always make the wrong decision. If you think the wrong way. What was so easy in the model portfolio, because it was only about play money, is now suddenly unsolvable in direct trading with real money in your own securities portfolio. So you sit in front of the broker trading platform and are at a loss.

Immediately we talk about the fact that this question on the stock exchange is actually absurd. Before that we clarify how decisions are usually made. And we are not only talking about shares.

How we decide

People like to be right. Not only on the stock market. Not only on the stock market. Because we need confirmation. That strengthens our self-confidence. Conversely, we want to avoid mistakes at all costs. But when we think of shares in trading – what is a mistake? A wrong trade? A profit that is too small? A severe loss on a single share? We will come back to this later.

In any case, we want to be right. User Ego wants that. And we want to be rewarded. However, if we are in a loss-phase, the stress level of the investor or trader usually increases. And research shows that when we are under stress, we make riskier decisions. Which in turn leads us to interesting facts.

20,000 decisions per day

20,000 is quite a lot and the first decision that every person probably makes during the day is whether and how long you stay in bed after the alarm clock has rung.

Now we don’t know how many decisions an average trader makes per share trading day but we do know that there are probably too many to do everything right all the time. Therefore we have to approach it differently, as we will see in a moment.

No “Psycho” contribution

Even if the author has already written a book about the psychology of the stock market (“Success on the stock market begins in the head”), he is very critical of this field of study today. Why? Because nobody has ever been successful with these advisors in selling shares.

Because it doesn’t really help when you talk for pages about the power of the subconscious, when you explain the trader’s intuition with colorful examples, when you chew through various trading emotions or when you discuss fear of loss. What use is it to him, if he knows that his subconscious is just reporting anxiously?

Does this make it easier to sell shares? …

No author of such books can answer the trader rather the question, what he should do now with the concrete Trade with this one share. We have given the example above with the quarterly report.

After reading 5 books on stock market psychology, do you think you will make the better (or the right) decision in such a case? Do you then know whether you will sell the stock here and now? And what are good decisions anyway? What is good selling? Let’s look further.

Making good decisions in trading

The right decisions when trading shares or other underlyings are first made on the meta level. And this is about things that unfortunately many people have never really thought about. Among other things these are things like:

  • How can I learn trading sensibly and directly
  • What asset classes are there at all that I can trade (shares, ETF, futures, certificates etc.)
  • How do I save until I have enough money to trade stocks
  • Broker Comparison: How and where can I find an online broker provider whose fees allow successful share trading (and if not, how can I make a simple portfolio change) and much more
  • Depot Bank: where is my money and how is it protected?
  • How can I learn more about online trading? Is there a good course provider that can help me?

A small tip – inserted here: do not trade based on (financial) messages. The news can be bad and the price will go up anyway – or vice versa.

But stop! Actually, this article about selling stocks correctly? So what’s the point? Why do we ask about the bank or custody account, talk about the provider of this service?

Well – to sell shares correctly – at the best price – is one thing. Of course it is important to use good techniques in this respect. Selling and trading has to be learned. But:

Trading is complex – but not rocket science

The online trading of shares is already a little more complex. And that’s why certain topics require you to take a step back a little. Even if stock exchange is not a “Rocket Science”.

So you should think about everything in a complex way. So continue on or with the meta level. Only then do we move on to the stock market and finances, the stock and the sale of shares themselves.

Make a good decision on the stock market. These are first general decisions, away from the daily trading practice of a share.

Far away from the daily business. But as soon as it is then about the individual trade or the individual share, the air becomes clearly thinner. Here, supposedly right or wrong decisions are always evaluated retrospectively when selling (and also when buying). And that is – to be honest – no art.

The right exit strategy – basic rules for every investment

That applies by the way to each kind of the investment of funds, all the same whether one trades, Stockpicking operates, ETFs buys or in the bank funds aufschwatzen lets itself be. Stock exchange is simple – if you look back.

Because whether it was right to stop the stock trade – let’s stay with the example from above – before the quarterly report (i.e. to make a sale), will we know when the quarterly report is published? Correct? Not quite!

Online sale of shares via stop order? Or with a market order. On Open? There are many options. With a share as well as with a fund, a certificate or a CFD. These basic rules must always be observed in your finances. Only then will the Euro grow on your broker account.

By the way: do not chase after a hot tip on the stock market. You should always think about your own securities (ETFS or shares etc).

Decisions are always relative

Ultimately, what counts in online trading and sales is profit. That is already clear. But before that, there are a few other things you need to understand. For example, we don’t know what the price of a share does after the quarterly report is published.

It wouldn’t be the first time that good figures for shares are being met with a sharp drop in price because the company’s outlook may be disappointing. Or that bad figures lead to rising share prices because even worse things were expected. Stock markets can never be predicted.

So – once again – we are not getting anywhere. We must therefore return to the meta-level. But this time we are going one floor lower.

Stock selling with a plan – a strategy is needed

The stock exchange, shares and the individual case. What a story. A story about high profits. For example, if you had bought Apple’s stock several years ago when the company was on the verge of going out. Or a story about collapses, if you were invested in Wirecard shares.

Was it wrong to buy Wirecard? And were Apple shares right? Here and now the answer seems clear and unambiguous. If you look in the rear-view mirror. But a few years ago? So you have to ask differently and include the risk here.

Was Apple a high risk investment? Probably in the 90s. Today – not in the snapshot. And one would have become rich by bold buying and the right selling (or still holding?).

Were Wirecard shares a high-risk investment? 5 years ago? Hard to say. After the first rumors about shenanigans probably already. Timing is always crucial at both Apple and Wirecard. But what else should timing be called in individual cases except luck or coincidence? You can never time a single stock transaction with certainty.

Timing is relevant

With both shares one could have gained or lost money as a trader or investor. And after Wirecard had fallen from over 100 to 1, one could have made 100% if one had bought at the low. We leave the shortening of a share (“short sale”) out of the equation here…

We are back at it: “everything is relative”. Which brings us back to strategy, floor 2 of the meta level and trading.

Correct buying and selling decisions

When one rejects shares is closely related – on the meta-level floor 2 – to the question of when one buys shares. Because even at this level, we still see online trading from a bird’s eye view, even though we are already a little closer to the ground, i.e. to day-to-day operations.

In or on this level it is about the development of trading rules, which ultimately flow into the trading strategy or, more precisely, make it up.

Stock trading rules (buy, sell, position size, etc.) in general can – and this may come as a surprise after what has been written so far – very well be right or wrong. But now comes the crucial piece of the puzzle: this statement only applies to the entire strategy and not to the individual trade in a stock.

To sell correctly means to test, test, test…

All right. Trading rules. So the advanced stock trader knows that he needs a trading strategy. This includes buying shares as well as selling them. But at this point he often makes the mistake of not relying on data and facts.

He takes over presented strategies from various media (books, internet etc.) and refrains from checking these strategies. But how else can one quantify right or wrong if not by means of a test?

Do we ask ourselves at this point how to end a trade? What are the basic options available to us here with an online broker? Well, first of all I can realize profits and for this purpose one likes to use a so-called target or price target. The idea behind this is that the trade has developed too quickly in the right direction and you just don’t want to give up the price profits anymore.

Another possibility – parallel to the price targets or alone – is to set stops. Stops as well as price targets can be applied on the basis of percentages or depending on the fluctuation (volatility).

Another possibility is to stop the trade after a certain time (days, weeks, minutes etc.), which is unsurprisingly called “time exit”. And if you stay at the end of the day (“end of day trading” – and not “day trading”), such time exits can be implemented in practice online, for example with a “market on open” or with “a market on close” order. Provided you trade shares and not CFDs, because these auctions only take place on regulated markets and can give the performance a small boost.

And then you can get out by using an indicator. For example, if an RSI reaches a certain threshold, or a Bollinger Band is hit and much more.

The playground for exits is enormous. Because all 4 options listed above have different parameter settings. And then there are the various linking options. Because of course you could combine a stop loss with a price target and a time exit. Or use only two of the three together. And much more.

And to take it to the extreme: it doesn’t always have to be an “and” connection. An “or” in the right place has already given the performance one or the other boost, that much can be revealed at this point.

The strategy does not have to fit the trader…

Is the point of a share that the strategy, and thus the right entry and exit, fits me as a trader? Is it about making the right decisions in every stock trade? Is it about me making profits every day? That I time the sale perfectly? Every time the little (or very?) surprising answer is: no!

A trading strategy must work

The only thing that matters is that a trading strategy works at the bottom line, i.e. makes profits. And if there is any other way to find out, except testing (testing, testing…), please write to us. We are all ears here, as the saying goes.

To the topic “a strategy must fit the trader” we recommend this video.

Of course it is quite tricky in practice when it comes to correct rules for trading or selling in particular. Because even the phrase “working below the line” is often subject to a certain amount of interpretation.

After all, how much profit is enough (for me) when trading a share? How much profit is good (enough)? And what price (risk/drawdown) am I willing to pay for this share in order to make (high?) profits?

I still remember when we developed highly technical trading models in our online investment consulting (Robo Advisor). All well and good. But when the model (= the strategy) was finished, a decision had to be made.

Namely, whether the results were good enough to include the strategy in our trading portfolio or not. And since we didn’t develop these strategies for ourselves, but for clients who invested their money (and who were usually not traders), we had to be particularly sensitive in this respect.

Important data of a trading system

How high and long was the drawdown? How many trades were made on the exchange? How often was a share bought and sold? How was the profit distribution? How strong was the correlation with other models and much more.

Each individual segment was certainly quantifiable using clear key figures. But all in all, a final decision had to be made. And we didn’t have an algorithm for this, but rather our experience, which came into play here.

Evaluating equity strategies – here are some examples of important key figures

  • Profit per year
  • Profit distribution in other periods (quarter, month, week etc.)
  • Correlations to other strategies
  • Drawdown length
  • Drawdown duration
  • Average drawdown and its frequencies (10%, 5% etc.)
  • and much more

Selling shares correctly is therefore relative. And is closely related to all other aspects of an investment or trading strategy such as the use of a market order, stop order or limit order. Or other core segments like portfolio selection and position size determination.

The sale of shares therefore needs to be understood by the investor, buying or selling must always be right. So even if you are reading this article because you want to know how to sell stocks and other securities better or correctly to optimize your finances – that alone will not help you to become a professional trader.

The ideal way with shares must always be the test. The baking test. The stock analysis. Only the comparison makes us safe, as it is called. And without this information, it will unfortunately not be possible to invest (or trade) successfully on the stock market and earn money. Successful investors simply leave as little as possible (or nothing?) to chance.

They have now held out until here. Let us now nevertheless give you some tips on how to sell shares better. Since you have read up to here, you know that we can’t tell you whether you should stop the current trade and take the profits with you or whether you should let it run a little longer.

Rather, we want to help you learn the right basic understanding so that you become a better trader and optimize your investment. Or so that they are not ripped off by the advisor in the bank. And this includes right selling as well as right buying.

10 rules for correct selling of shares

Note: the order of the advice has nothing to do with its value.

  1. Sell shares – Don’t pay attention to the individual case – the big picture counts
  2. Develop sales rules that work
  3. Emotions have no place in trading. Neither in buying nor in selling. Do not get angry about (many or high) losses and do not be happy about (many or high) profits. See point 1.
  4. First of all, think about how you can end trades at all and then evaluate all possibilities with the help of back tests.
  5. Consider the interaction of risk and return. The more risk you take with a share, the higher profits are possible. But this also increases the risk of loss.
  6. Back and forth (frequent buying and selling) supposedly empties pockets? Who says so – and is it true? Why don’t you check it out before you start to orient yourself.
  7. Let profits run, limit losses. Sounds good. But is it true? You can find out more in a few minutes by means of a baking test.
  8. Consider the meta level. What am I thinking about right now?
  9. Quality or quantity? Here too, facts are needed. And not everything that sounds plausible is correct.
  10. And the most important tip: Trading strategies are there to minimize decisions. And the best strategy is the one (besides the fact that it works) that takes every decision (in daily trading practice) away from the trader.

Conclusion Selling shares

Perhaps the contribution did not quite go in the direction you expected. Perhaps you expected a more concrete answer to the question of when to sell shares. But let’s be honest. How should we be able to give this answer?

What do you do now after you have read these lines? Close this article and continue to search the Internet for the right and good exits for shares? If you do that, we guarantee that you will not be successful. Because you have to find the answer yourself – as part of a complete trading strategy.

You will only become a trading professional if you try to answer the question of when to sell shares by means of facts (backtests). If there was another way, we would have found it already in the 20 years we have been dealing with the stock market. But this way does not exist.

Therefore the way of learning remains open for you. So how to sell shares correctly, you have to learn from the bottom up. Like everything you want to do successfully in life. On our homepage you will find many basic offers for trading beginners.


See my other articles about stocks trading:

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