Every stock trader must have faced an unexpected massive loss at one time or another in his/her trading. When that happens to you, your heart will break down. Especially for the effect the loss has in terms of money, it creates a feeling that can only be experienced than described. Often this results in a trader either going back to the original profession or going beyond to explore their opportunity to emerge again as professional stock traders.
The case of a sudden unexpected loss is not something new in the stock trading. It happens to any trader. It can happen at any time, in any cycle, in any year. Many traders have gone broke in the history just because of such sudden turnarounds. Sometimes these events, in fact, triggered the longest bear markets like the one we are facing now.
What we should realize from such times is that it is not the end of the game. It in fact is a part of the multifarious scenarios that the stock market presents to its participants from time to time. Much like a massive loss, the stock market also gives, sometimes, a massive run away profit. But we tend to forget such things and remember only massive loss situations.
The other reason why people get caught up with this sudden loss and completely lose their mind over it is because they miss the opportunity of taking profit when available. The stock market plays a fair game with its participants though it does not behave in certain patterns that are obvious to known operators. But it is the participants’ failure not to fully capture the profit side and thus end up drowning on the losing side.
A massive loss is not the end of the world. Most of the times it is perceived to be so. That is why we need to first prepare ourselves not to think like that. Remember nothing happens in your stock trading without giving you an opportunity to learn a lesson.
For this reason, and also for a reason that even after learning all the trading principles there comes a time when you end up making a massive loss for whatever cause. It is thus important to learn to cope with such a scenario. For a new trader who had never experienced a massive loss, it would definitely be hard to stomach. It is easy to see why they would end up in a massive loss. This time you will plan alternate support systems so that you will not go broke overnight. One last thing that you should note when coping with massive loss is faith. Faith is a basic fact of our life. We cannot live even for a moment without it. Have faith that you can start again. May be this will not happen again to you which means that the path from here is golden. Many people, who end up with such massive losses in their first few trades only, really lose faith in the markets. They go back to their life never to come back again. Prepare with alternative ways to tackle such a situation in the future. When you do this, you will definitely emerge again as a professional stock trader!
You cannot always control what you get. The actions you take will indeed bring results. However, there can often be other factors that influence those results. Focus your energy on pointing your actions consistently and persistently in the direction of your target. Those actions will, one way or another, move you in that direction. What you can control is what you do, so make the very most of that opportunity. Although other factors may at times work against you, there is great benefit to having your own considerable strength working for you.
The other side of the market is that when a stock has fallen; most investors may want to sell along with the rest of the market. This can be a bad decision (sell low).There are many reasons a stock price drops and some of them have nothing to do with the soundness of the investment. That’s why if you only follow price you may miss an opportunity.
The most important and most often repeated advice was that we can go wrong despite all our analysis and strategies. There is no such thing as guarantee in the stock market. This is very powerful information at times to let us avoid small losses from turnng into large losses.
There are some key elements to take into consideration in order to limit exposure to risk and minimize losses. This may take time to develop all the necessary skills to plan and execute trades in such a manner as to maximize profits. However, the rewards for success prove to be well worth the risk one takes by investing in the stock market
(The writer is a retired police officer, a veteran investor in the stock market. He offers guidelines to help to create a profitable portfolio). |
E-mail
