How to sell after financing purchase? Master the complete trading logic for entering and exiting the market.

There are many ways to invest in stocks, but many beginners often only understand how to simply buy stocks to share in a company’s operational results. In fact, the stock market is constantly changing, and if you can accurately assess a company’s prospects, you have the opportunity to profit multiple times when stock prices rise, or even profit inversely when prices fall. At this point, it is necessary to flexibly utilize the two major tools: “financing” and “securities lending.” This article will analyze the core mechanisms, operational processes of these two tools, and most importantly—the practical skills of how to sell after financing to buy—to help investors establish a complete trading framework.

1. The essence and operation mechanism of financing

What is financing?

The concept of financing is actually very simple, similar to applying for a mortgage when buying a house—you put in a part of the money yourself, and the bank provides the other part, with the house serving as collateral. Stock financing works the same way. When you are optimistic about a certain stock but lack sufficient funds, or want to amplify your investment effect, you can borrow money from a broker to buy stocks. The stock then becomes your collateral.

The core advantage of financing is: you only need to invest a portion of the funds to fully participate in the stock’s rise and fall, effectively leveraging your position. Both gains and losses are amplified accordingly, so it must be used cautiously.

Practical example of buying on margin

Suppose you are optimistic about a certain tech company’s future prospects. The current stock price is 100 yuan, but you only have 40 yuan in cash. Through financing, you put in 40 yuan, and the broker lends you 60 yuan, purchasing 1 share. A few days later, the company releases positive news, and the stock price surges to 150 yuan, and you decide to sell.

After deducting the (60 yuan) borrowed from the broker and interest, you might gain about 90 yuan, with a profit of 90 yuan. The stock price increased by 50%, but your return reached approximately 125%—this demonstrates the power of leverage in financing.

2. Costs and exit calculations after buying on margin

How is financing interest calculated?

Since you are borrowing money from the broker, interest will accrue. The annual interest rate in Taiwan’s securities market typically ranges from 4.5% to 6.65%, with interest calculated daily.

Financing interest = Financing amount × Annual interest rate × Borrowing days ÷ 365

For example, if you finance the purchase of a large stock priced at 2,000 yuan, paying 800,000 yuan yourself and borrowing 1,200,000 yuan. If after 20 days the stock price rises to 2,200 yuan and you sell, the interest payable is:

1,200,000 × 6.65% × 20 ÷ 365 ≈ 4,372 yuan

After deducting interest, commissions, and taxes, you can still realize a certain profit.

Timing for selling after financing

Because interest gradually erodes profits daily, financing is generally not suitable for long-term holding but is more appropriate for short-term trades based on specific positive news or clear technical breakouts. Once the profit target is reached, it should be realized immediately; otherwise, interest will gradually eat into the gains.

3. Risk mechanisms in margin trading

1. Liquidation risk

This is the most serious risk in margin trading. To protect their interests, brokers set a “maintenance margin.” When the stock price drops causing the maintenance margin to fall below the threshold, the broker will require the investor to deposit additional margin. If the investor fails to do so in time, the broker has the right to forcibly liquidate the position—this is known as “margin call” or “liquidation.”

For example: You buy TSMC on margin at 500 yuan, investing 200,000 yuan yourself and borrowing 300,000 yuan, with an initial maintenance margin of 166.7%.

Later, due to worsening global economic conditions, TSMC’s stock price drops to 380 yuan, and the maintenance margin falls to 126.7%. The broker warns that if the price continues to fall, they will forcibly sell. You have two options:

• Top up to above 130%: temporarily preserve the position but requires ongoing monitoring
• Top up to above 166.7%: fully restore to initial margin level

If you do not deposit additional margin in time, the broker can forcibly sell the stock the next day, resulting in significant losses.

2. Interest erosion risk

If the stock price consolidates for a long period, even if there is no profit or loss, the daily interest costs will erode potential gains. Especially with stable stocks paying only 4-5% dividends, the financing interest can offset dividend income, making the financing strategy less worthwhile.

4. How to sell after financing—comprehensive exit strategies

1. Set clear profit-taking and stop-loss points

Financing amplifies trading results, so discipline in entry and exit is especially important. It is recommended to combine technical analysis to set:

• Profit-taking point: sell immediately when the stock reaches resistance levels and cannot break through, to avoid repeated oscillations that consume interest costs
• Stop-loss point: exit immediately if the price breaks below support levels; do not hold onto the hope of a rebound, as interest costs will accelerate losses

2. Choose stocks with good liquidity

When using margin, always select stocks with large market capitalization and high liquidity. If you pick small-cap stocks, during sharp declines, you may face no buyers and be unable to sell, and even if the stock rebounds later, your position may have been liquidated at a loss.

3. Use partial operations to reduce costs

Limited margin funds make it difficult to accurately predict the lowest point. You can deploy in stages at relatively low points, allowing for additional entries if prices fall further; if prices rise, early entries will generate substantial gains. The same applies to partial exits—sell part of the position at resistance levels to lock in profits while leaving some to continue running.

4. Closely monitor maintenance margin changes

After buying on margin, investors must pay close attention to daily stock price fluctuations and maintenance margin levels, keeping sufficient cash ready for margin calls. Do not passively wait; actively manage risks.

5. Introduction to securities lending—mechanism of inverse trading

Securities lending is the opposite of margin trading: instead of borrowing money to buy stocks, you borrow stocks from the broker to sell. When you anticipate a stock will decline or is overbought, you can short sell by borrowing securities, and after the price drops, buy back to return to the broker, profiting from the price difference.

Important restrictions on securities lending

• Usage period: before dividends or shareholder meetings, securities must be returned forcibly
• Short squeeze risk: if many short positions exist, major investors may deliberately push up the stock price to force short sellers to buy back at higher prices
• Forced buy-in: if the stock price rises causing the maintenance margin to fall below requirements, the broker has the right to forcibly buy back the securities

6. Successful strategies for margin trading

1. Choose appropriate entry timing

The best timing is before the company announces major positive news, when the stock price has not yet entered a main upward phase. This allows participation in the rally while avoiding chasing high.

2. Continuous monitoring and adjustment

Decisions on how to sell after financing are not fixed. Investors need to continuously evaluate based on stock trends, technical indicators, and news, adjusting holdings or taking profits accordingly.

3. Diversify to reduce risk

Leverage from financing allows focusing on 2-3 opportunities across different industries or stocks. Even if one position consolidates, gains from others can contribute to overall profitability.

7. The fundamental logic of investing

Both financing and securities lending are tools to amplify trading effects, but the tools themselves are neither good nor bad. The true determinants of success or failure are the investor’s judgment of the fundamentals of the target, understanding of the overall economy, and mastery of technical analysis.

How to sell after financing to buy ultimately depends on the investor’s knowledge and psychological resilience. Properly utilizing tools, establishing discipline, and strictly executing plans are the keys to long-term profits in the stock market.