| [click to enlarge] |
 |
| Flogging a dead... |
 |
| The painful ride down... |
 |
| My Stock Consultants |
TAKING A LOSS
The pain of losing money can far outweigh the joy of making it. Losses have many times the emotional impact of a gain. It is considerably harder to sell a stock at a loss than at a profit, which seems obvious, yet it is an emotional barrier many struggle to hurdle until it is often too late and they exit the market vowing never to return.
You just need something to bypass your emotional response which is never easy as human beings. If you reached the point where you are physically sweating over your loss, when you feel you can’t reveal it to your spouse, are you in any fit state to be making a decision? No, so you need a mechanism so you have no confusion about what decision to make and when.
If ever you are having trouble taking a loss, or getting emotional and still holding the stock then I recommend reading the following list. You may find you will have your sell order in the screens before you get to the end of it:
#1 As a stock falls further, the more intense the selling becomes as higher losses cause more selling decisions. By selling early the loss is the smallest loss
#2 If a stock is going down, it is far more likely to continue going down than it is to turn around quickly simply to suit you
#3 If you sell 5 falling stocks, it will be the right thing to do in 4 cases, but you will only remember the other one as we are emotional creatures by nature
#4 If you sell your losing stock now, you can always buy it back and you never know, you might buy it back lower than you sold it for in the first place
#5 If you sell it now, you are no longer exposed to it, all you need do is try to come to terms with the loss you have taken
#6 If you are making a loss on a stock, ask yourself this ~ “If I had cash, would I buy this stock now at this price?” If your answer is “No” then why are you holding it? Flog it
#7 Your state of mind has a value. It is a precious commodity. Having a stress free family life is a priority
#8 If you sell now, it is similar to entering the ‘eye of the storm’. It’s calm in there. You have an opportunity to think rationally. You can observe from a distance. You can consider entering the storm again and if you decide to do so, you will be thinking more clearly and be armed with a more informed investment/trading plan
#9 The fastest way to become a long term investor is to get a short term trade wrong
#10 If in doubt, sell it. By doing so it locks in a capital loss for tax purposes and you can always buy it back later
You may just find that loss taking can be very cleansing.
|
; "Flogging a dead...")
; "The painful ride down...")
; "My Stock Consultants")
