Decide, before you buy, under what conditions you will sell if the stock price falls. Generally, a falling price without an underlying change in business fundamentals is not a good reason to sell. If the price falls as a consequence of a change in the expected growth rate of sales or earnings, this may be a sufficient reason to sell. Establish some parameters before you buy that can provide the reasons for you to sell the stock. If you were lucky enough to buy stocks in your portfolio before a market advance and now have large capital gains in those stocks, you have other alternatives.
Many investors are reluctant to sell because of the capital gains tax.
As a consequence, they may hold on too long and lose more than the capital gains tax when the stocks they own begin their decline. Here are two ways to approach this problem. You lose any potential future gains, but you were able to sell on your terms at an attractive price. Second, you can hedge your stocks by buying either put options on each stock in your portfolio or an index put option. A put option buyer profits if the stock, or the index, underlying the put falls in price.