The primary explanation to target this subject is based from the reality the great bulk of e-mails. I get are tightly connected to that issue. The number one problem out there is generally one of the following:
Getting ‘stuck (stayed)’ with a position.
A position huge quantities and devastating losses.
A single stock position that is way too big.
The main problem is always the same exact above. At some point in time things changed and control shifted. You started off being in control and then, The stock you bought is beginning to control you. The position then went on to harmful your financial capital. And finally harmful for your emotional thinking and your capital.
Again, the beginning trigger is always ‘Control’. To be more accurate: The loss of control. In this article is exactly what you need to do in order to escape “losing control”:
No game plan if you think the stock goes to the downside.
Fixed: Apply stop losses. Create a habit of getting into your stop loss as soon as opening a new position.
Rationalize(thinking) losses and making excuses.
Fixed: Your stop loss will handle of any rationalizing.
Trusting in a company, management, your stock advisory, fundamentals etc.
Fixed: Your stop loss will protect you from RED-events, issues you do not recognize or might not predict and more.
Trading Stop loss ?
Observe what the different solutions have in usual? You got it. A stop loss. It’s not affected by emotions and systematization. And secure you to a position if a stock achieves a predefined price.
In making a long story in short words : You need to manage anything you may in order to recover control and then keep in control. If your position is in control of you, do anything it takes in order to return in control. Sell? Absolutely Yes, that is correctly what I replied: SELL Or EXIT. Go to cash. Totally free your mind and stop rationalizing a losing position. Take a break. Re-group. Restore your mental capital and emotions. Next come back and stay to a controlled way of trading. Use stop losses and stay in control.
MoneyMunch says: each one problem is as a result of traders not cutting their losses and allowing all of them increase into big losses. Trading stop loss order. Trading stop loss. again, I am saying trade in stop loss order.
Few Links for help newbie:
Trading stop loss protect for Traders.
Stop loss definition and basic.
Extra articles on Trading stop loss order.