Do you get scared when the idea of investing in the stock market comes to your mind? Well, you are not alone. It is normal to get nervous when you are investing your money. There is no doubt that investing in the stock market is risky. But when done correctly, it may be one of the most effective methods to increase one’s net worth. But do you know what happens when you sell a stock?
No! This is quite a common answer. You do not have to worry. In this blog, we will discuss the process of selling shares and also what will happen after selling a stock.
However, it is vital to understand the basic process of selling stocks. But, as a trader or investor, you do not have to worry about how your deals are cleared and completed. Because various experienced intermediaries will take care of it for you. But, you must know how to sell a stick and what happens when you sell a stock.
Curious? So, let’s start our discussion and learn about the same. Here we go.
Firstly, there are some important points that you should know before learning to sell stocks.
Key Points To Remember
- Stocks define a company’s ownership equity and provide shareholders with voting rights. Also, it gives a residual claim on profits in the form of capital gains and dividends.
- Individual and institutional investors join together on stock exchanges. They buy and sell shares in a public environment.
- Supply and demand affect share prices when buyers and sellers place orders.
- To maintain an accurate and fair market, professionals or market makers usually control order flow and bid-ask spreads.
- Improved liquidity may be an advantage to companies that list on markets. They also have the possibility of profiting. However, they may be liable for increased costs and regulations.
Moving further, let’s discuss the steps to selling the shares. It is a vital thing before you know what happens when you sell a stock. So, let’s learn the process.
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Steps to Sell Stock
Generally, investors put a lot more effort into buying a stock than selling a stock. That’s a mistake. Because during the selling they can make money. However, it is crucial to get it right if you want to collect your profits. So, let’s start discussing the correct steps for selling stocks.
Step 1: When should you sell your stocks?
Try to sell your stocks, when your sell depends on your investment plan, time horizon, and risk tolerance.
However, human psychology and anxiety can sometimes get in the way. Stocks can be sold for a variety of reasons, both good and poor. When you are ready to pull the trigger, evaluate your feelings.
Moreover, before you sell the stocks, try to think about why you bought the stocks in the first place. Did you think about what kind of news or circumstances might motivate you to sell it? Examine your thinking to ensure you are not falling for an emotional reaction you will come to regret later.
Step 2: Select On An Order Type
If you know how to purchase stock, you will know how to sell it too. Because the order types are the same. But the purpose is different. Moreover, you can use order types to reduce stock costs. Therefore, the basic goal of the sale is to reduce losses and increase profits.
Let’s discuss the various types of orders that you can select according to your preferences.
|Order Type||What is it?||Use it if…|
|Market Order||A request to purchase or sell a stock as soon as possible at the best price available.||You want to get rid of the stock at any cost.|
|Limit Order||A request to purchase or sell a stock at a certain price or better.||If you cannot sell at or above the price you desire, you’re alright with keeping the stock.|
|Stop (or stop-loss) Orders||A market order will only be executed if the stock price meets the price you select.||If a stock’s price falls to or below a specific level, you wish to sell it.|
|Stop-limit Order||A stop order and a limit order merged into one. If your stock falls to the stop price, a limit order is executed. But, only if you can sell at or above the limited price.||If a stock declines to a particular price, you want to sell it. But, only if you can sell it for a specific amount.|
Step 3: Complete The Trade Ticket
If you are selling through a broker, you’ll need to fill out a trade ticket. Or you have to order on the broker’s website or trading platform to get started. However, the deal will settle two business days after the order executes in most cases and at most brokers. It means the cash from the sale will be in your account.
Filling out the trade ticket is simple.
- Select Sell.
- Enter the stock symbol.
- The amount of shares.
- Your order type (and, if needed, a limit or stop price).
- Then, the “time in force” or order expiry date.
You have learned how you can sell stocks. Now, let’s discuss what will happen when you sell the stocks.
What Happens When You Sell A Stock?
When you sell your stocks, both parties in the process, the seller, and the buyer must fulfill their respective roles. You must deliver the stock shares. And the buyer must pay his broker for the stock shares.
However, both parties have sufficient time to deliver the stock or money to their broker under the settlement guidelines. The Securities and Exchange Commission used to wait 5 days for a stock deal to settle.
Therefore, it will take at least three days for you to get money if you sell stock. Trade settlement is the process of selling or purchasing assets and arranging the delivery of securities and money. Your broker will inform you that the T+3 settlement rules apply to the selling of your shares.
T+3 settlement indicates that on the third day following the trade. The money from your stock should be in your broker’s hands. On that day, you should be able to pick up a check for the profits from your stock sale.
So, if the broker is sending you the check, it should arrive on the settlement date. It depends on how quickly the postal service processes it. Moreover, they may transfer the money into your bank account on the settlement date. When a broker transfers money to a customer, there are always fees involved.
To sum up, now you are aware of the steps of how you can sell the stocks. Also, you learned what happens when you sell a stock. The above blog is the answer to all your questions regarding the selling of stocks. We have provided you with all the essential information about selling stocks. So, now, you do not have to worry. If you want to start your investing and trading journey, start right now. But, always keep the steps of selling stocks in mind.