UMC, your example shows a $1000 loss on a $5000 investment,...

UMC, your example shows a $1000 loss on a $5000 investment, leaving you with $4000. Sure, they may go up again the next day, but what if they drop further?

What if they drop another 20% the next day. Now you have 4,000 - 800 = 3,200. Do you still hang on, hoping they will go up again?

Note that they will have to go up by MORE THAN 55% (NOT 40%) to be near your initial investment, i.e. 3,200 + 1760 = 4960 (a 55% rise). Ask me how I know!

Money management is simply following the old adage - Better to be safe than sorry, that's all.