It is very important to exit a loss making trade quickly.
The larger your losses get on trade, higher the
chances of you acting irrationally during that trade.
The most common irrartional behaviour is averaging down your losing trade.
Ever experienced this?
You take a position and tell yourself “if this goes X% against me, then I’ll exit quickly”
The problem happens when the stock price falls down so quickly that you simply freeze.
Before you know it the price is well below the X% you had decided.
And now you’re stuck!
And now you enter the worst mode ever - The Hope Trade mode!
You start doing weird things like talking to the stock price, negotiating with yourself, promising god not to repeat this again once you get out of this position, walking around switfly, heart beats pounding, etc.
The most common irrartional behaviour is averaging down your losing trade.
Ever experienced this?
You take a position and tell yourself “if this goes X% against me, then I’ll exit quickly”
The problem happens when the stock price falls down so quickly that you simply freeze.
Before you know it the price is well below the X% you had decided.
And now you’re stuck!
And now you enter the worst mode ever - The Hope Trade mode!
You start doing weird things like talking to the stock price, negotiating with yourself, promising god not to repeat this again once you get out of this position, walking around switfly, heart beats pounding, etc.
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