We all know this. Buy shares when the prices are low and the stocks are undervalued. That is, when the share price is lower than its real price. Buy stocks when the market is facing a bear run and sell to make your gains when the market enters a bull run. In simple terms, a bear market is when the prices of stocks are low or falling and there isn’t too much optimism from investors. This is the best time to buy because you can get a good deal on stocks. A bull market is the opposite, when the prices of stocks are high or on the rise. It seems logical enough, buy when the price is low and then sell when the price rises and you’ll make money. That is how the big stock-investors have made their money, sniffing around for good deals when everyone else seems to be selling then selling when everyone else is buying.

Know when to stop

The selling part is key. Many of us don’t know when to sell. And that is logical. Everyone would like to make the absolute maximum they can make. The money was hard-earned after all. In an article on warrenbuffet.com, the thoughts on this are shared using the life of the “Oracle of Omaha” as a reference:

Once, when Warren Buffett was a teen, he went to the racetrack. He bet on a race and lost. To recoup his funds, he bet on another race. He lost again, leaving him with close to nothing. He felt sick -- he had squandered nearly a week's earnings. Warren Buffett never repeated that mistake. Know when to walk away from a loss, and don't let anxiety fool you into trying again.

In a similar way, when your portfolio is increasing in value, you’d bought your stocks for cheaper and the market is picking up, investors are trooping to the stock market and the stock prices are really on the up, sell. Sell, sell, sell! Sell after you’ve made a reasonable gain on your investment. An example of this could be a 15% appreciation of the share prices in a year compared to 6% returns on one year bonds (that means you’d be making 7% above what you’d have made if you had invested in bonds). While I can’t give a definite figure on what should be considered “reasonable” because different investors have different risk and return appetites, do not be (too) greedy. Know when to stop. Make your money and go. Just like Kenny rogers sings in The Gambler, “you got to know when to hold ‘em, know when to fold ‘em, know when to walk away and know when to run…”

Read more on the article here