What is conviction stop?
A conviction stop is an exit triggered by your thesis breaking, not by the price falling. Where a stop-loss sells on a price level, a conviction stop (sometimes called an intellectual stop-loss) sells when the reason you owned the stock is no longer true.
Also called: intellectual stop-loss, thesis stop, when to sell when the thesis breaks
Price stops vs thesis stops
A price stop-loss is mechanical and ignores why you own the stock. It will shake you out of a position whose thesis is perfectly intact during ordinary volatility, and it will hold you in a position whose thesis is already dead as long as the price has not fallen yet.
A conviction stop fixes both errors by tying the exit to the thesis. You sell when a pillar breaks, regardless of price, and you stay through noise when the pillars hold. It is the answer to the most common plain-English version of the whole problem: when should I sell?
Common questions
When should you sell a stock?
A thesis-based answer: sell when the specific reasons you bought it are contradicted by a filing, an earnings result, or a material event, not merely when the price falls. A lower price with the thesis intact is a different situation from a broken thesis at any price. This is research, not investment advice.
When to sell, by ticker: open it