Friday, 25 November 2016
In the world of trading, I've learnt from painful experience its better to take a quick and small realised loss than to suffer a conviction sapping and margin eroding unrealised loss.
Once I have cut loss; I feel relieved.
Money can lose; but presence of mind cannot.
Same goes for the investment side of my portfolio.
Not taking profit can mess with our minds too.
Take for example - M1, a stock I'm not vested in.
If you had bought in at $1.50 during 2009, you would be a most happy retail investor during March 2015 - M1 hit $3.94!
That happiness was short lived as by May 2015, it broke below $3.50.
Some of you wily old fox retail investors may have sold all or half your position here.
Any lingering doubts whether you have done the right thing are all cleared out during August 2015 when M1 broke below $3.00.
This was your last chance to protect your 2 bagger winnings.
Want to guess how the person who didn't sell at $3.00 is feeling now?
Would he join others in adding to M1 at below $2.00 since its "so cheap"? Or would he be more likely to "capitulate" and sell if M1 drops down to $1.80? Surely he is not going to let a winning position turn into a loss? Or?
All of us have our "uncle point".
Once we've reached that level, we become like headless chickens.
Its better not to let ourselves be in such situations.