After you buy a stock, there is only 1 thing you truly control.
When you get out.
You do not control how much it goes up.
You do not control when it goes up.
You do not control if it goes up at all.
The only real choice you have is how much you are willing to lose.
Sometimes bad things happen. A company reports bad earnings. Bad news hits. The stock gaps down overnight. You could do everything right and still take a big hit. That is part of the game. You cannot avoid it completely.
But holding onto losses is dangerous. The longer you hold, the more damage can happen. The goal is to get out as early as possible, while still giving the stock enough room to move normally. Stocks go up and down every day. You do not want to sell just because of a tiny dip.
And yes, sometimes it gaps down, takes your stops, and then reverses higher. That happens. However, you don’t want to be in a situation where it gaps down, you wait until it recovers before getting out, but it keeps falling.
Every big loss starts as a small loss.
And the bigger the loss, the harder it is to recover.
A 10% loss needs an 11% gain just to get back to even.
A 20% loss needs a 25% gain.
A 50% loss needs a 100% gain.
That is precisely why protecting your downside is so important.
Cutting losses is hard.
As long as you are still holding the position, there is hope. Hope that it goes back up. Hope that you were right after all. Hope that you do not look stupid.
Taking losses hurts. Admitting mistakes hurts.
Studies have shown that people need twice the gain to offset a loss. In other words, losses hurt twice as much wins.
Because as long as the position is open, the loss is not final. There is still a chance it recovers. A chance you end up being right. But once you sell, the loss becomes real. The mistake becomes permanent.
But you need to accept losses as part of the process.
Nobody is right all the time. Not even close. There's always uncertainty. Investing is not about being perfect. It is about making more than you lose over time.
The sooner you cut a loss, the better.
Sitting on a losing position usually means something went wrong. Your timing was off. Your stock choice was wrong. Or the market environment is not favorable right now.
There is also an opportunity cost. Money stuck in a losing position cannot be used elsewhere. That capital could be working more effectively elsewhere.
Learning to cut losses fast is one of the most important skills in investing.
After you buy a stock, there is only 1 thing you truly control.
When you get out.
You do not control how much it goes up.
You do not control when it goes up.
You do not control if it goes up at all.
The only real choice you have is how much you are willing to lose.
Sometimes bad things happen. A company reports bad earnings. Bad news hits. The stock gaps down overnight. You could do everything right and still take a big hit. That is part of the game. You cannot avoid it completely.
But holding onto losses is dangerous. The longer you hold, the more damage can happen. The goal is to get out as early as possible, while still giving the stock enough room to move normally. Stocks go up and down every day. You do not want to sell just because of a tiny dip.
And yes, sometimes it gaps down, takes your stops, and then reverses higher. That happens. However, you don’t want to be in a situation where it gaps down, you wait until it recovers before getting out, but it keeps falling.
Every big loss starts as a small loss.
And the bigger the loss, the harder it is to recover.
A 10% loss needs an 11% gain just to get back to even.
A 20% loss needs a 25% gain.
A 50% loss needs a 100% gain.
That is precisely why protecting your downside is so important.
Cutting losses is hard.
As long as you are still holding the position, there is hope. Hope that it goes back up. Hope that you were right after all. Hope that you do not look stupid.
Taking losses hurts. Admitting mistakes hurts.
Studies have shown that people need twice the gain to offset a loss. In other words, losses hurt twice as much wins.
Because as long as the position is open, the loss is not final. There is still a chance it recovers. A chance you end up being right. But once you sell, the loss becomes real. The mistake becomes permanent.
But you need to accept losses as part of the process.
Nobody is right all the time. Not even close. There's always uncertainty. Investing is not about being perfect. It is about making more than you lose over time.
The sooner you cut a loss, the better.
Sitting on a losing position usually means something went wrong. Your timing was off. Your stock choice was wrong. Or the market environment is not favorable right now.
There is also an opportunity cost. Money stuck in a losing position cannot be used elsewhere. That capital could be working more effectively elsewhere.
Learning to cut losses fast is one of the most important skills in investing.
After you buy a stock, there is only 1 thing you truly control.
When you get out.
You do not control how much it goes up.
You do not control when it goes up.
You do not control if it goes up at all.
The only real choice you have is how much you are willing to lose.
Sometimes bad things happen. A company reports bad earnings. Bad news hits. The stock gaps down overnight. You could do everything right and still take a big hit. That is part of the game. You cannot avoid it completely.
But holding onto losses is dangerous. The longer you hold, the more damage can happen. The goal is to get out as early as possible, while still giving the stock enough room to move normally. Stocks go up and down every day. You do not want to sell just because of a tiny dip.
And yes, sometimes it gaps down, takes your stops, and then reverses higher. That happens. However, you don’t want to be in a situation where it gaps down, you wait until it recovers before getting out, but it keeps falling.
Every big loss starts as a small loss.
And the bigger the loss, the harder it is to recover.
A 10% loss needs an 11% gain just to get back to even.
A 20% loss needs a 25% gain.
A 50% loss needs a 100% gain.
That is precisely why protecting your downside is so important.
Cutting losses is hard.
As long as you are still holding the position, there is hope. Hope that it goes back up. Hope that you were right after all. Hope that you do not look stupid.
Taking losses hurts. Admitting mistakes hurts.
Studies have shown that people need twice the gain to offset a loss. In other words, losses hurt twice as much wins.
Because as long as the position is open, the loss is not final. There is still a chance it recovers. A chance you end up being right. But once you sell, the loss becomes real. The mistake becomes permanent.
But you need to accept losses as part of the process.
Nobody is right all the time. Not even close. There's always uncertainty. Investing is not about being perfect. It is about making more than you lose over time.
The sooner you cut a loss, the better.
Sitting on a losing position usually means something went wrong. Your timing was off. Your stock choice was wrong. Or the market environment is not favorable right now.
There is also an opportunity cost. Money stuck in a losing position cannot be used elsewhere. That capital could be working more effectively elsewhere.
Learning to cut losses fast is one of the most important skills in investing.
