What is a stock sale

Selling shares in the best possible way: This is how selling shares works!

How does the sale of stocks work?

You can only sell shares through a broker. As an intermediary, the broker is responsible for trading in securities for the account of the customer. For example, the broker can work at your bank or be an online broker. Depending on the situation, you can place the order by phone, in person or online. The shares themselves are then sold on the stock exchange under the currently applicable conditions.

Step by step: This is how the sale of stocks works through an online broker

If you - like many investors - hold a cheap online portfolio, you can sell your shares as follows:

Step 1: Log into your online depot

On the screen you will see a list of all your securities including securities identification numbers (ISIN) and current purchase prices.

Step 2: Choose the stocks you want to sell

In the order view you can select the relevant security, the number of units to be sold and the stock exchange on which you want to sell your shares.

Step 3: Set a limit for selling the shares!

It is advisable to always set a so-called limit when selling shares. This sets a lower limit for the price at which you no longer want to sell your shares. Sounds paradoxical, since you have only just seen the purchase price. In the short time between placing the order and the actual sale, anything is possible on the stock exchange! A limit protects you from negative coincidences.

4th step: Confirm the order and wait!

You now have to confirm the order to sell shares by TAN. As a rule, the sale now takes place quickly. Your proceeds will then end up in your clearing account no later than the next bank working day. Finished!

The best depots 2021 in comparison

Would you like to trade stocks or ETFs and are still looking for the right securities account provider? Compare with our depot comparison and find the best depots.

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When should I sell stocks?

When selling stocks, timing is absolutely key. Because when you sell stocks, the decisive factor is profit and loss. In short: if you sell too early, you are giving away returns. Who sells too late, too.

The crux of the matter is that no one can predict exactly when the right time has come. Stock exchange prices develop in such complex contexts that they simply cannot be predicted, not even by stock market speculators who have made the matter their profession.

What is there, however, are empirical values ​​that you can stick to in order not to catch the wrong time when selling stocks.

The corona virus has brought the financial markets into a tailspin and unsettled many private investors. Are you wondering what the crisis means for your finances? Then we recommend our finances guide in times of crisis.

Sell ​​stocks or not? 5 tips for good timing!

It is better not to sell shares when the price is in the basement!

When the price is down, you get very little price for your stock. If this price is below what you paid when you bought it, you are definitely making a negative deal. It is therefore often worthwhile to sit out the dry spell. Then you still have a chance that the price will rise again. Long-term investment strategies even build on this effect: in the long term, good stocks usually compensate for price fluctuations.

A bad price is not always a good reason to sell stocks!

In addition to price gains, stocks always have dividend gains ready. If a stock with a currently weak dividend price is above the market average, you should check carefully whether you are really selling it!

Price increases alone are also not a reason to sell shares!

A short-term or long-term price increase is sometimes misunderstood as a signal to sell the shares quickly in order to dry out the price gains. Who knows when it will go downhill again? In such a case, stock market experts take a close look at the company that issues the shares. As long as sales and earnings do not fall, there is no realistic reason to assume that the price will fall abruptly. You can continue to hold such stocks. Exception: If you think the stocks are overvalued, sell them!

Avoid Panic Selling Stocks!

Stock trading has a lot to do with psychology. Many investors are infected by market sentiment. So there are always massive panic sales when the financial situation goes downhill in general. Even if the past does not allow predictions for the future, it has been shown time and again that things will look better after a crisis - at least for those who do not sell their shares during the crisis!

Don't speculate on selling stocks!

Buying and selling stocks for short-term profit is the punter's business. It is more like a game of chance than an investment and especially if you are new to the stock market you shouldn't get involved in it!

When does it make sense to sell a stock at a loss?

When selling losing stocks, investors always act on a knife's edge. On the one hand, stocks need the chance to compensate for price losses in the long term. Second, there is no point in not selling stocks that are consistently falling short of expectations and watching them ruin your portfolio profits.

There are two key answers to the "Hold or Sell?" Question:

  1. How much loss can you take?
  2. How is the future price development of the shares to be assessed?

If you have losing stocks, read all the forecasts on corporate development that you can get in specialist magazines, the daily press or via specialized stock exchange newsletters. Keep yourself up to date with the business figures (also per quarter) and announcements about the company goals. After doing such research, get the impression that the company will manage to keep the shares. Otherwise, consider selling them better.

How can I work with limits to sell stocks well?

The so-called limits are one way of protecting yourself against losses. You can set these before selling shares. Limits are part of the order supplements. There are different options for both buying and selling stocks. There are also various options for limiting their validity in time.

The two most important limits to be aware of when selling stocks are:

  • Stop Loss Order: There may be only seconds between the placed sell order and the actual sale of the share. In the world of the stock market, however, the tide can turn 180 degrees during this time. By setting a stop loss order, you specify that the sale of the shares will be stopped if the price falls below the set limit.
  • Trailing order: This limit sets a stop loss order, but allows you to continue to benefit from any rising prices. Because the trailling order “grows” with the price. It raises the stop limit for your minimum limit parallel to the current rate, either in euro amounts (absolute) or in percent (relative).

Tip: Limits play a rather minor role in long-term equity portfolios. However, they become interesting when you are about to liquidate your securities account, for example at the beginning of your retirement. With a little patience you will get closer to the best price for your shares through limits than you could through the quick sale of the shares at current conditions!

What are the costs of selling shares?

If you want to sell shares, you have to expect the following costs and fees:

  • Custody fees
  • Transaction or order fees

While the custody account fees correspond to a kind of basic fee, the transaction or order fees are incurred individually for each movement in the custody account. That is, for every purchase and every sale of shares, measured in number. It is worthwhile to compare different brokers here, because the conditions of the providers differ considerably. Online brokers offer significantly lower prices than the branch bank!

Depot comparison

Taxes when selling shares: you have to pay attention to this with the tax authorities!

Income from the sale of shares (as well as share profits from dividends) must be reported to the tax office. Even if the income comes from foreign stocks, German tax law applies. Accordingly, income from share profits has been accounted for via the flat rate tax since the beginning of 2009.

If the investment income from all of your investment forms is above the tax exemption of € 801 for singles or € 1,602 for married people and registered partnerships, these are taxed at a flat rate of 25%, plus any solidarity surcharge and church tax. Income from stock earnings is the adjusted profit after deducting all expenses, costs, losses, and fees for trading stocks.

If you trade through a German broker or a German bank, you don't need to do anything, because 25% of your income is withheld by most German brokers and transferred to the tax office. With foreign brokers and banks, on the other hand, you usually have to take care of reporting your income yourself, for example in the annual tax return.

Good to know: There has long been a discussion about abolishing this taxation model because it relieves major investors who would otherwise have to tax their profits at top tax rates of 45% instead of just 25%. The taxation of share profits via normal income tax is currently being discussed (as of September 2019).

How can I reinvest profits from selling stocks?

After selling your shares, the question is, what do you do with the profit? There are many ways to reinvest the money, for example in fixed-term deposits, real estate as an investment or equity funds.

If you want to invest the money you have won back on the exchange, we advise you not to spend the full amount on it. The same rules apply as when entering the stock market: spread risk, spread over many pots.

Everyone has to sell stocks. A long-term investment horizon with a broadly diversified portfolio, however, reduces the need to a minimum and is on average even more successful than the short or medium-term buying and selling of stocks. Because every movement in the depot ultimately costs transaction fees, which the price gains must first bring in. Therefore: sell fewer shares, be more patient!