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TAKING A LOSS - Things to Consider

Poster: Freehold
Link:http://hotcopper.com.au/threads/stt-weekend-lounge-4-6th-sept-2015.2588796/#post-15938889

Don't really get stressed trading these days ... its all a bit robotic for me now.. in the early days I did massively stressed about each tick move against me .. I remember dropping $10k on a stock and being physically sick and then traumatized for weeks after hoping it would claw its way back up ... spent a whole holiday worried about it ...eventually got my money back 2 months later it shorted my life by 2 years I reckon ... realised that its not worth all that worry....but learnt the lesson... Better to take you cash off for a small loss and buy back in later. I discovered this ... I recommend all beginners and novice traders take a copy print it out and stick it to your trading screen (Red highlights things that particularly struck a chord with me)

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.Link: http://hotcopper.com.au/threads/stt-weekend-lounge-4-6th-sept-2015.2588796/#post-15938889Link: http://hotcopper.com.au/threads/stt-weekend-lounge-4-6th-sept-2015.2588796/#post-15938889Link:http://hotcopper.com.au/threads/stt-weekend-lounge-4-6th-sept-2015.2588796/#post-15938889Link:http://hotcopper.com.au/threads/stt-weekend-lounge-4-6th-sept-2015.2588796/#post-15938889

I started trying to educate myself further last week by reading the Short Term Knowledge Library. This is the top post. I was feeling fearful so read it, digested it and then made a (probably bad) decision. The short term traders threads are not for day trading, rather more for holds of 6-18 months. It is a good read and I have found some great tips. But I think that this post is what triggered me to sell about 20% of my losing shares. I am an avid reader but as always, opinions differ. eg don't catch a falling knife and the opposite, buy when the stock starts to move up. All this studying has totally confused me. I have taken big losses before with no regrets eg $28k on MSB. It has not recovered, but I did manage to recover the loss quite quickly. But by selling IOU I feel it has perhaps backfired on me. Anyway here is the link. I don't comment on the STT's thread, but I feel the posters there are on the whole very experienced and genuine. They run a tips competition so they do not wish to lose their good reputation, although of course they cannot get everything correct all the time. GLTAH's Joannie.