The majority of advice about trading is focused on the buy decision. Determining when and where to buy a stock is what most people think about when they plan a trade. While buying is obviously important it is the sell decision that determines your ultimate level of success more than anything else. Finding a great stock helps but if you don't have some way to systematically harvest profits then the chances that your great pick turns into a dud increase quickly.
The problem that most people have with selling is that they are afraid that their timing will be wrong and they will dump a big winner prematurely. There is also a tendency to become emotionally attached to a stock and to not want to admit that maybe it is no longer going to perform as hoped.
The best way to deal with these psychological issues is to always be prepared to rebuy a stock that you have sold. Get rid of the idea that selling is a significant decision that restricts your ability to own a stock. Selling is simply a tool and it can be reversed in the blink of the eye.
One of the big emotional hurdles for some trades is that they hate the idea of buying a stock back at a price that is higher than where they sold. They dwell on the 'loss' rather than the value of the strategy. In general, it is helpful to forget entry and exit points when we trade and focus mainly on the price action. Whether you have a loss or a gain is important but it should not be what drives the actions you take.
Once you are mentally prepared to always rebuy a stock that you have sold then the next step it to develop a methodology for doing just that. Whenever I sell a stock, I continue to track it and will look for new setups to develop. In my favorite names I will maintain a small position after I've taken big profits so that I am ready to trade it again. I'm not a long term investor but there are many stocks that I foresee trading repeatedly over the course of many years.
When it come to harvesting profits there are several approaches. The main focus should be on not allowing things to slip too far from highs. In a market like we have now with strong momentum, the best approach is to use a trailing stop. As a stock continues to trend higher, you move up your stop and that guarantees preservation of your gains.
There is always the risk of an overnight gap down or some unusual volatility that will trigger stops that might be too tight but that is where the mindset about always being ready to rebuy a stock you sold can be helpful.
An alternative to trailing stops is to sell into strength. This sort of timing can be very difficult but this guarantees your profit and, once again, you can always rebuy if you like.
I tend to use a combination of approaches. I will sell a portion of shares into strength and use a loose trailing stop on another portion. I find that if I make a number of partial sells it helps me to cultivate patience. Most traders have a strong impulse to 'ring the register' prematurely. The best way to battle that is to make a few small sales to satisfy the urge. I almost never make a single buy and sale of a stock I trade. There is always a series of entry and exit points. That helps me reduce risk and it keeps me in stocks I like even when they are acting poorly.
One of the big changes in the market recently is that commission costs are zero in many cases. You can sell small positions and it won't cost you a penny. Buy-and-hold proponents often used transaction costs as an excuse to sit idly rather than to be aggressive at taking profits. As long as you have a strategy to reenter stocks you favor long term, the ability to sell at no cost is a tremendous tactical tool that should help you enhance returns on stocks that you favor for the long run.
The key to selling is to have a clear strategy and to appreciate that it will not preclude you from being a long term buy-and-hold investor since you can always buy back what you have sold.