The Nifty is in some kind of a correction. While it is possible to make money by going short during these corrections, the big money will still be made when going with the main trend - up. Yet, learning to sell is important.
1. We sell to reduce market risk. When our charts suggest a topping out pattern, ot signs of a correction then we close our trading positions to lower the risk of our portfolio. Your decision to sell is made when you see distribution in the time frame you trade.
2. We sell to reduce individual stock risk.
■Sell a stock that you may have bought incorrectly (i.e., too early, too late after a breakout buy point, a stock pattern fails or you erred in reading a chart incorrectly) and performance disappoints shortly after the purchase.
■Sell any stock that has a surprise including such events as reporting an accounting error, a badly missed earnings announcement, a significant top management change or terminated merger and acquisition discussions.
■Sell a portion of a stock position that, because of a large run, ends up comprising too large a percentage of your total portfolio and thereby increase its risk .
■Reduce exposure to an industry group if it falls out of favor.
■Sell a stock that has underperformed the market and you expect to continue doing so over the near term future as measured by its relative performance during the time you’ve held it
(Rules adapted from stockchartist.blogspot.com)
But, go ahead and sell. Buying and selling together make up the trading plan. So buy, and, when required, sell.