Don’t Hold Onto Losing Stocks

Probably the biggest mistake any stock trader can make is holding onto a losing stock. People often get emotionally attached to the stocks they buy and cannot think rationally when that stock begins to dip. Personally I try to take all emotion out of my stock trading and I prefer to use a trailing stop loss to make sure I get out of any stock that is on it’s way down as soon as possible (while also trying to avoid getting pushed out on a normal swing.)

The Myths That Cause People To Hold Onto A Losing Stock

• The stock is so low now that it has to go back up.

No, it doesn’t. It may not reach the level you bought it at for years. It may never reach that level again. Just because a stock has reached a new low doesn’t mean it won’t be reaching another new low tomorrow and the next day!

• I have to wait until the stock goes back up to where I bought it so I don’t lose money on it.

You’ve already lost money on it and you are liable to lose a lot more.

The Question You Should Ask When You Are Holding A Losing Stock

“If I had the money that is in this stock right now available to me, would I choose this particular stock, of all of the stocks available for purchase?”

Why should you ask this question? Because you do have that money available. All you have to do is sell the stock to get to it. Sell that stock and buy a better one.

There’s no good reason to hold onto a loser stock.