| | IowaMan, once again we butt heads :-)
Your response to my post is excellent.
How about if I just cut to the chase?
Just two points:
"what happens when a person doesn't follow this advice and because of some reason, fear and paralysis, or a market change so swift they can't get out of a stock and they find themselves holding an intel, csco, pcln, ebay etc"
If you have a plan (system) that you follow for entering
a position, you should (in my opinion MUST) have an exit
strategy in mind and written down.
There's something solid about writing down you
enty AND exit plans that keeps most traders honest.
If the bottom drops out and you're caught napping, my suggestion is to bail out ASAP.
Get out, Boy Scout!
Suck it up and take your loss.
Only cowards and those paralyzed by HOPE will hold when
all things are falling.
If a person can say, "I made a mistake", they have some of
the right stuff to be a successful trader.
This may very well be the hardest lesson for any trader.
Maybe Drbob can better explain the "why" of this attitude
we harbor, this need to be right at all costs. And cost is
what it can bring to those who hold when the market says get out.
For me, the market dictates what I should do.
When I start believing that I'm smarter than the market,
it'll be time for me to pack it up and retire to my island.
(I don't really have an island... not that fond of water anyway.)
Second point - time frame
Personally, I day trade almost exclusively, so exiting is not a problem.
If a person is swing (or position) trading and not watching the market full time, then there's going to be a day when all hell
breaks loose and they come home to discover that their stock has
lost 10 points today. What do they do?
They check the indexes and their stock chart and make a decision which they carry out that night or the next morning.
And why the rush? Maybe the market will come back.
And maybe it won't. Maybe it's only the beginning of a really steep fall.
The point is that they must have already decided what to do
when disaster happens. They must have a written plan for
exiting if things suddenly melt down.
That plan may be to hold on for a certain number of days
and see what happens.
It may be to hold until the price falls to a certain percentage or a certain price point.
But whatever the plan, they should execute the plan
without hesitation, without second guessing, and without
falling back on HOPE.
After all, it's not like you can't buy back when the
market starts to recover. Sure, you lost some money.
But if the fall turns out to be a serious one (and we
never know when that will occur), chances are you saved yourself from a major loss.
It takes a plan to survive and prosper.
It takes acting upon that plan without thinking or second guessing.
It takes a willingness to realize that we will experience failure, that perhaps
more than half of our trades will be losers.
That's the reality for most traders.
It's up to us to either accept it or hide our head in
the kitty litter.
I can't type any more... fingers are numb. |
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