Then when should you sell? You shouldn't sell when it drops, I've already made the mistake of selling as it's still climbing. At what point are you comfortable with selling your shares? In a perfect world, you'd sell at its peak, but that's practically impossible to predict.
Picking tops, for many people, is harder than picking bottoms. Bottoms are easier as you have no commitment yet. Tops are harder, it's like saying goodby to an old friend that's treated you well.
First question, what is your strategy. Is this a trade (day, week, month kinda thing) or is it serious long term investing? Generally investing starts at a year hold, putting you in the more favorable long term capital gains tax rate. Anything shorter gets taxed at your regular tax rate and is usually referred to as a trade, not an investment.
In trading, it's all about looking at probabilities of a down move vs an up move. When odds of an up move from here are low, and odds of a down move are high, one should sell. Example, last week on the China news, I sold my trading position, some at 383 one day, and at 385 the next. It was very hard to do. It was so bad, that I spent all weekend thinking about re-entering. I did it because I saw the odds of a down move being higher than an up move. In no way did I expect this week to be as choppy as it's been!
What I do is pick a time frame to look at, and try to predict the trend during that time frame. If it's much above the trend line, sell the trading position. If it's below, buy. Then add odds of macros falling apart, president doing something stupid, North Korea nuking their neighbor, sector rotation out of tech stocks, etc. Also factor in the possibility of the trend changing to the upside (going parabolic) or changing to the downside.
On a long term investment, you have to decide what you are investing for. A profit after 2 years, buying a house, riding this economic cycle but selling before the next recession, kid's college, retirement, kid's retirement? Then try to predict stock movement against that goal and time frame. Another strategy is peel off portions of your gains and keep some for later. That can be done with a trader's mentality, basically pick local tops and sell a small percentage of holdings every year. There is no one solution that fits all, it's all about what your personal situation and plans for the investment are.
Realize that short term trading is tricker than long term, and is sub-optimal for many (most?) people. For tax reasons, psychological reasons, and the unpredictability of short term movements.
