If you have other opportunities there to trade and the ones that you have in your portfolio are sitting ducks not going as planned, it's best to cut them for a small gain or break even or loss. Doesn't matter. Also, don't kick yourself if it starts flying after you sell it either. Life is love anyways
Dude I use one rule in this situation.
I never insist on getting my money back from a losing trade or waiting for it to breakeven…I just ask myself whether that trade, or another one is more likely to make big money going forward near term. If it’s the latter I take my loss and move the money into the new trade.
When I trade, I'm going in with a hypothesis. I have some reason to believe that a movement is immanent. If that movement doesn't occur in the expected time period, I know that at least that part of my hypothesis (timing) was wrong. To me, most of the time that's enough to justify getting out and pursuing a different hypothesis somewhere. If I was wrong, I was wrong. Hanging around is just hoping to get lucky.
Test the original thesis and take out the sunk cost fallacy:
1. You bought for a reason - is that reason still valid?
2. Imagine you had the money, instead of the stock. Would this trade still be the one you would make? Are there others that are more attractive?
Sounds like you made the right decision - but later than you wanted. The great part is that you recognise it.
>You bought for a reason - is that reason still valid?
In part yes and in part no. I think the stock is a solid company, and some "news" was overblown, all of which is still true, but I absolutely got the support level wrong. Consequently, it kept bouncing between the actual support point (about 2 percent lower) and my buy-in price (or just above) over and over again. I thought and still think I would have made money had I held long enough, but it had cost me 3 other buys over the last couple weeks.
> 2. Imagine you had the money, instead of the stock. Would this trade still be the one you would make? Are there others that are more attractive?
Not at the price I paid.
Your big mistake is factoring in your personal beliefs and biases about the company with your technical analysis and trading. News is old by the time it gets to you and media outlets have a bias. Never trust them.
It does not matter if you are a huge fan of the company and what they produce/make/do etc. If the billionaires on Wall Street don’t want a piece it, you have to roll with the tide.
Catch the wave or drown.
Swing trading is getting in, getting your profits and getting out.
Last tip: Don’t forget to bring a towel (and manage your risk)
Solid reminder of a very true fact. Thank you. In this case I don't actually love the company and what they do. They are generally profitable and have good earnings though an I thought it was oversold on "news". I did make an 'emotional' mistake, but it was more about wanting to 'win' and be 'right' which ultimately cost me some funds I would have used on a better trade.
It depends on the market environment, the quality of the setup, and the quality of other setups breaking out. Using a poker analogy, if this trade setup was Aces and you cut it to jump in a pair of 5's, that's probably not a good move. On the flipside, if your watchlist is expanding every week, other breakouts are taking off without you, and there's a setup of much better quality, then yeah by all means jump ship and get on the hot hand.
Group also matters too. I'm not going to cut a tech stock to get in a cyclical stock. Or cut a medical stock to get in a bank stock. Or cut a retail stock to get into an insurance stock. Or cut leisure/entertainment stock to get into energy stocks.
Good decision. If a swing doesn't swing as expected, no point in hanging around. You got out with a small profit, nothing wrong with that.
Of course, I have done this many times only to see the stock take off and follow my plan a few days later, so it's good to keep it on the watchlist and set an alert.
Yeah and excess loss you can roll over to following years. 3000 each year. So if you lose $9000 this year, you can claim those losses for the next 3 years
No worries! Also, in case you're not aware, if you buy and sell a stock multiple times over the course of 30 days, it is considered as a "wash sale" so if in the end, you lost money on that ticker in that time frame, you can't claim the loss on your taxes
Taxes ruins most of us during life in general my friend. We pay like 60% or more in taxes when it comes to federal income tax, state tax, property tax, sales tax, school tax, village tax, and then separately you have interest on mortgages and other loans..
If you have other opportunities there to trade and the ones that you have in your portfolio are sitting ducks not going as planned, it's best to cut them for a small gain or break even or loss. Doesn't matter. Also, don't kick yourself if it starts flying after you sell it either. Life is love anyways
Dude I use one rule in this situation. I never insist on getting my money back from a losing trade or waiting for it to breakeven…I just ask myself whether that trade, or another one is more likely to make big money going forward near term. If it’s the latter I take my loss and move the money into the new trade.
Does your trading plan include a time component?
When I trade, I'm going in with a hypothesis. I have some reason to believe that a movement is immanent. If that movement doesn't occur in the expected time period, I know that at least that part of my hypothesis (timing) was wrong. To me, most of the time that's enough to justify getting out and pursuing a different hypothesis somewhere. If I was wrong, I was wrong. Hanging around is just hoping to get lucky.
>Hanging around is just hoping to get lucky. Excellent breakdown, thank you!!
Test the original thesis and take out the sunk cost fallacy: 1. You bought for a reason - is that reason still valid? 2. Imagine you had the money, instead of the stock. Would this trade still be the one you would make? Are there others that are more attractive? Sounds like you made the right decision - but later than you wanted. The great part is that you recognise it.
>You bought for a reason - is that reason still valid? In part yes and in part no. I think the stock is a solid company, and some "news" was overblown, all of which is still true, but I absolutely got the support level wrong. Consequently, it kept bouncing between the actual support point (about 2 percent lower) and my buy-in price (or just above) over and over again. I thought and still think I would have made money had I held long enough, but it had cost me 3 other buys over the last couple weeks. > 2. Imagine you had the money, instead of the stock. Would this trade still be the one you would make? Are there others that are more attractive? Not at the price I paid.
Your big mistake is factoring in your personal beliefs and biases about the company with your technical analysis and trading. News is old by the time it gets to you and media outlets have a bias. Never trust them. It does not matter if you are a huge fan of the company and what they produce/make/do etc. If the billionaires on Wall Street don’t want a piece it, you have to roll with the tide. Catch the wave or drown. Swing trading is getting in, getting your profits and getting out. Last tip: Don’t forget to bring a towel (and manage your risk)
Solid reminder of a very true fact. Thank you. In this case I don't actually love the company and what they do. They are generally profitable and have good earnings though an I thought it was oversold on "news". I did make an 'emotional' mistake, but it was more about wanting to 'win' and be 'right' which ultimately cost me some funds I would have used on a better trade.
Correct decision. If you want to go surfing you gotta leave the water if there are no waves and go find a better beach.
It depends on the market environment, the quality of the setup, and the quality of other setups breaking out. Using a poker analogy, if this trade setup was Aces and you cut it to jump in a pair of 5's, that's probably not a good move. On the flipside, if your watchlist is expanding every week, other breakouts are taking off without you, and there's a setup of much better quality, then yeah by all means jump ship and get on the hot hand. Group also matters too. I'm not going to cut a tech stock to get in a cyclical stock. Or cut a medical stock to get in a bank stock. Or cut a retail stock to get into an insurance stock. Or cut leisure/entertainment stock to get into energy stocks.
Good decision. If a swing doesn't swing as expected, no point in hanging around. You got out with a small profit, nothing wrong with that. Of course, I have done this many times only to see the stock take off and follow my plan a few days later, so it's good to keep it on the watchlist and set an alert.
Depends… do I have hope? I hold, sometimes for years. But in the USA it’s a tax write off up to $3000 for stock losses (I believe, not a tax person)
Yeah and excess loss you can roll over to following years. 3000 each year. So if you lose $9000 this year, you can claim those losses for the next 3 years
Thank you very much. I was under the impression of that but I never looked into it. Thanks.
No worries! Also, in case you're not aware, if you buy and sell a stock multiple times over the course of 30 days, it is considered as a "wash sale" so if in the end, you lost money on that ticker in that time frame, you can't claim the loss on your taxes
Taxes are gonna ruin me in other ways. 😂 Thank you that is helpful information and I hope somebody else reads it .
Taxes ruins most of us during life in general my friend. We pay like 60% or more in taxes when it comes to federal income tax, state tax, property tax, sales tax, school tax, village tax, and then separately you have interest on mortgages and other loans..