It’s just human nature, but it’s also the reason why so many people struggle and normally lose money in the stock market…
Are you making this big mistake?
You invest in Stock ABC and it immediately jumps into profit. As a trader, what’s your next move?
With several different options, do you sell it and take the cash, hold on, or buy more of it?
Now let’s say you buy Stock ABC and it immediately drops by 10%…
How do you play it now? Buy, sell, or hold on to it hoping for a bounce back to break even?
These 2 simple scenarios have proven to be the downfall of average traders and investors on Wall Street.
You see, basic human nature tells us all not to take a loss. So when we open a trade that goes against us right away, we want to hang on to it until we can get back to our open price.
The problem there is that the stock may NEVER get back to the price we purchased it at.
You could be waiting years and years for Stock ABC to get back to your original price of $40, all while it’s falling to $30, then $20, then $10…
Instead of cutting your loss right away for a minimal loss of 10% or less and finding a new stock to invest in, you’ve now lost 75% of your money!
And the opposite is true for the inverse scenario.
When you buy Stock ABC at $40 and it jumps to $42 right away, you want to take your profits and run. It’s a win versus lose paradigm for many investors.
Yet that’s another mistake as bad as not being able to take a small loss.
While you’re counting up your small profits from closing out your trade, Stock ABC could be continuing its climb from $40 up to $50, then $60, then $70…
That would mean your 5% from closing at $42 would pale in comparison to the 75% profits you could have had!
Here is the 1 rule of investing and trading you must not forget:
Cut your losers and ride your winners.
This is just 1 part of a proven stock trading system that could make you an expert trader. Check for an invitation to the Stock Code Breaker course.
