3 Ways To Handle Losing Trades That'll Kill You
Even as we've been kept awake at night wetting our sushi pajamas in dread of
losing trades and leaping off our abode, most losing trades come from misconceptions born within our heads.This is how the majority of losing trades take place:
1 - Double down. Whatever moron gave birth to this had to be a guy with a lot of money. The original idea of doubling down must have come from a under the influence rich chap in Las Vegas playing at the MGM Grand Hotel and Casino. The model of doubling down is easy, if a stock you are hanging on to falls 15% in value, buy double what you originally bought. Over time, as poverty-stricken common folk got their hands on the theory, it mutated into averaging down, meaning purchasing any additional amount of a stock that you are sitting in when it drops 15 % or greater.
Infamous stock trader Nick Leeson mastered the art of averaging down into losing trades, and took it to a whole new level. That double down stock trading whiz kid caused the collapse of Barings Bank, United Kingdom's oldest investment bank, for which he was sent to jail.
Never throw good money after bad. Never risk more than you are attempting to gain.
2 - Value investing. This tactic must be the brain child of evil institutional traders who trust the stupid common folk will assist them in getting rid of their longs in a down trending stock market. The idea of value investing is simple, look at the P/E ratio. If the average P/E ratio for a sector, such as Tech, is 18 and you find a company with a P/E of 12, then you are buying this business at a deep discount, a real valuation pearl, right? Not!
There is a reason a business has a P/E less than a industry arithmetic mean, institutional investors do not love it as much as they love other companies within the sector.
The majority of valuation entry points include purchasing a company that is within a downtrend. Hence, most value investors buy low and sell even lower.
Never purchase a stock that is within a downtrend no matter how low the P/E ratio is.
3 - Hold on to a bad trade until it comes back. That is the intellectual retard method. Stock traders that trade like this have no business investing in the stock market. Their similar to that monkey which grabs the fruit and then the trap closes on the arm. If the monkey would let go of the fruit, he could get away from the trap. But the monkey never lets go.
Time is value, it is the material life is made of. Way back in March of 2000 the Nasdaq traded at 5,000. Today it trades at less than half that at 2186. So for the last 10 years, you are still waiting for the market to come back. These are 10 years you could have been trading and making money, forever consumed. At simply 10% a year, you could have doubled your money. But it is worse than that.
The majority of retards that use this line of attack can not do arithmetic. Let us say the Nasdaq dropped from 5,000 down to 2,500 or 50%. Most monkey retards believe if the market goes up by 50% they'll get back to break even. Not so. The stock market would have to go up 100% to get back to 5,000.
Never use buy and hold on a losing trade. Get rid of your losses as swiftly as possible.
In the episode below I talk a little about the absurdity that is value investing.
losing trades
by: Mike Smith... 3 Ways To Get Your Free Annual Credit Report by:Greg Quincy 3 Ways To Come Up With Unique Content For Your Online Blog 3 Ways In Which Ocd Support Online Help An Affected Person 3 Ways How An Online Entrepreneur Can Engage In Personal Development 3-Way Linking Is The Fastest Way To Generate Adsense Income In No Time 3 Vital Questions Before Product Launch Blast Off by:Michael Cheney 3 Vital Multi Level Marketing Business Secrets 3 Valuable Reasons to Have an Online Dollar Store 3 Undeniable Benefits of Online Content Distribution 3 Unconventional But Effective Adwords Optimization Secrets 3 Unconventional But Effective AdWords Optimization Secrets 3 UK Online Bingo Reviewed 3 True Benefits Of A Residual Income Opportunity