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9 Trading Wisdom for Traders

NEVER THROW MORE MONEY AFTER A LOSING POSITION

Never add to a losing position under any circumstances. Throwing more money at a losing trade will burn your capital faster than you can imagine. This is the main contributor that eliminates losing investors from the trading game. The only thing that happens when you buy more of a losing position is that your net worth declines. You hope that it may turn around eventually and your decision to buy will prove fortuitous. For every example of a fortune from an unexpected turnaround, there are ten examples of bleak outcomes.  

 

ALWAYS INVEST ON THE WINNING SIDE

Do not worry about trading on the bullish or bearish side, but always trade on the winning side. This is a brilliant piece of wisdom. Learn to master the art and science of investing on the winning side. You should be willing to change sides immediately when one side has gained the upper hand. You cannot stay rigid in your positions because the market is dynamic. Keep a close eye to see if the facts have changed regarding the company. If the facts have changed, you must change.

 

DO NOT HANG ONTO A LOSING POSITION

Failure to admit you were wrong and holding onto losing positions will cost you money. Watching your capital deplete in front of your eyes is de-motivating and mentally exhausting. However, your mind will be even more exhausted if you hold onto a losing trade. You will get more and more fearful with each passing minute, day and week.

In the meantime, you are missing out on a treasure chest of potentially profitable stocks that are waiting to make you money. Bad decisions are valuable sources of learning to master your trading technique. Cut your losses, adapt your trading strategy to include your new knowledge, and search for stocks that will make you money. In the stock market, time is money; there is no time to watch your stock fall all the way to the bottom. (more…)