When to Sell Stocks: Tired Nvidia Highlights 8 ‘Secrets’ and Number 2 is Key
In the year After an impressive run to top the rankings in 2024, Nivea (NVDA) in the year 2025 has shown signs of fatigue to begin with. Nvidia stock managed to shake off the volatility from June to October, hitting a new high in November. But problems resurfaced as the artificial intelligence giant slipped below its 50-day and 21-day moving averages.
The last two Nvidia slots come from the backstage, which poses even more of a risk. By the time such patterns are formed, the stock has already made significant moves. Not surprisingly, the recent roller coaster ride in Nvidia stock reflects the volatility seen in late-stage fundamentals.
Increased selling pressure and bearish sentiment in market indexes and major stocks like Nvidia reinforces the need for rules on how to buy stocks and when to sell stocks. Therefore, looking at the principles of risk management, do not ignore the eight “secrets” of sales.
Remember that investing is not an all-or-nothing or one-size-fits-all proposition. Managing risk requires managing your position size and exposure as well as your current profit cushion. What works for one person in one situation may not make sense for another investor.
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When to Sell Stocks: FOMO Vs. FOMU
Like everyone else, investors understand FOMO – the fear of missing out. When a hot name like Nivea hits one record after another, anyone who isn’t already a stockist is tempted to jump on that bandwagon before it’s gone. That can lead some investors to blindly ignore proven rules for buying stocks.
Meanwhile, investors are already sitting on big gains in Nvidia; Meta forums (META) and other high-flying growth stocks face a different kind of fear – FOMU, or the fear of clutter. That is, the desire for even large gains begins to fear seeing those early gains drastically reduced or even lost.
Nvidia stock provides a prime example. The AI leader rocketed 1,202% from its October 2022 low until hitting a record high in June last year. Nvidia’s leak in May was from a third-party source. The divergence to another all-time high in October came from the dangerous fourth level pattern.
That doesn’t mean Nvidia won’t continue to shake off the current pressure. It could very well be. But when stocks like Nvidia start to wobble after big gains and become more volatile, investors need to be vigilant about staying safe and locking in gains.
How to invest in Nvidia in 2025 and beyond: Draw lines, not conclusions.
Risk management – one pillar of the IBD method
IBD’s recommended market exposure rating provides one way to gauge how aggressive or defensive investors should be. This five-step system emphasizes the importance of risk management, one of the four pillars of the IBD strategy.
Click here to view the current recommended level and track any changes.
When volatile market conditions arise – good or bad – tracking the action around moving averages in indices and individual stocks is key to determining when to sell or hold.
8 ‘Secrets’ to When to Sell Stocks
It’s easy to be objective in deciding what stocks to buy. Before investing money, you can use stock lists, stock filter and Stock ratings Identify the best stocks to buy and watch.
But once you own stocks and have skin in the game, your mentality changes. Feelings of both greed for great gain and fear of great loss arise. These emotions can cloud your decision making. That makes it more difficult to maintain an unbiased, objective view of when a stock should sell.
To stay grounded and in the right frame of mind, keep these eight “secrets” in mind.
- Everyone makes mistakes. Be sure to cut all losses.
Even the best investors lose from time to time. But they will not be worried because the stock will decrease further. They quickly cut their losses and move on. Leave your ego and pride at the door. Don’t let it get you down – mentally or financially. - If you don’t sell soon, you will sell too late.
To lock in solid profits, sell your stock while it’s still high. IBD founder William J. As O’Neill says, “Your goal is to find and take significant gains and not get complacent, optimistic, greedy, or sentimental when your stocks are going strong.” Following the 20-25% Sales Rule will help you do just that. In a strong bull market, leading growth stocks such as Nvidia, Meta, Microsoft, and Apple, they may actually last longer than expected. But locking in some gains down the road allows investors to protect a portion of those gains, while still positioning themselves to take advantage of the continued run. It also reduces the risk of giving back too much in an extended pull. - Have a sales plan before You buy.
When it comes time to sell, the real drama begins. If you don’t have sales rules and an exit plan, it’s easy to freeze up and not act when necessary. If your stock is rising, you may be greedy and ignore certain sell signals and warning signs. Also, if you are sitting on a loss, you can do the “hold and hope” procedure. You pray for it to bounce back – as the descent continues. Stay grounded and keep your emotions at bay by developing a sales plan early. Write down target sales prices to both take profits and cut losses. - Don’t turn a good profit into a loss.
If you have a good profit say 10%, 15% or more and the stock starts to decline, don’t let that profit disappear completely. Seeing a 15%-20% profit turn into a 5%-10% profit is just as frustrating as seeing it turn into a 10% loss. You can always buy back the stock if it shows renewed strength and creates a valid buy point. - Don’t marry your stocks. Just dating them!
“For better or for worse, for richer or for poorer” is a good and time-honored approach to marriage, but it’s a bad idea when it comes to investing in stocks. In most cases, it’s better to take a good profit while you have it. And never hesitate to break up and protect yourself from a bad relationship if there are clear signs of trouble. - Sell the losing stocks first.
When you build a winning basketball team, you don’t trade all your core players for a bunch of bench morons. However, many investors do this. They sell stocks that are performing well and hold those that are showing losses. Plus, you think big profits are just around the corner. That’s usually just wishful thinking. Do the opposite. Sell your losers and use that money—if the market trend is favorable—to add winners to your list or invest more money in top performers you already own. - When buying a stock, focus on both the fundamentals and the stock chart. Focus on the chart when trading.
They say the view is good at the top, and this often applies to stocks as well. The warning signs appear on the stock chart – that is, technical analysis – before they appear in the company’s fundamentals. It is very important to use both technical and fundamental analysis when buying stocks. The same is true for deciding when to sell stocks. Focus on chart and technical analysis such as price and volume action and behavior around key moving averages. - The most important sales rule is to buy at the right time.
A very common mistake, especially for novice investors, is buying at the wrong time. Some don’t pay attention to market timing and buy most stocks when they go down during a market correction. Or they ignore the technical action on the stock chart and buy too early or too late. So before you buy a stock, make sure that three key factors – market trend, large returns from innovation and institutional support – are present. Doing so will help you enter at the right time, so that the odds of success are in your favor.
Follow Matthew Galgani on X (formerly Twitter). @IBD_MGalgani.
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