3 Ways To Handle Losing Trades That Doom Us (From The Inside Out)

http://www.guerillastocktrading.com/stock-trading/shocking-confession-i-see-t... Whilst we've been kept awake at night wetting our sushi pajamas for horror of losing trades and jumping off our abode, nearly all losing trades come from misconceptions born inside our brains.

This is how the majority of losing trades go down:

1 - Double down. Whatever moron came up with this idea had to be a chap with a lot of money. The earliest hypothesis of doubling down must have come from some intoxicated well-off chap in Las Vegas playing at the MGM Grand Hotel and Casino. The hypothesis of doubling down is straightforward, if a stock you are hanging on to falls 20% in value, acquire double what you first bought. Over time, as poverty-stricken common folk got their hands on the theory, it changed into averaging down, meaning purchasing any extra amount of a stock that you are hanging on to when it drops 15 % or more.

Villainous stock trader Nick Leeson perfected the skill of averaging down into losing trades, or so he thought. This double down stock trading mastermind caused the collapse of Barings Bank, United Kingdom's oldest investment bank, for which he was sent to jail.

Never fling good money after bad. Never risk more than you are seeking to gain.

2 - Value investing. This strategy must be the brain spawn of wicked institutional traders who hope the stupid common folk will help them in dumping their longs in a down trending stock market. The idea of value investing is straightforward, look at the P/E ratio. If the average P/E ratio for a sector, such as Tech, is 18 and you find a company with a P/E of 12, then you are buying this business at a deep markdown, a genuine valuation pearl, right? Not!

There is a reason a company has a P/E less than a industry arithmetic mean, institutional investors don't like it as much as they are fond of other companies within the sector.

Nearly all valuation entry points involve buying a company that is within a downtrend. As a result, the majority of value investors buy low and sell even lower.

Never buy a business that is within a downtrend no matter how low the P/E ratio is.

3 - Cling to a losing stock trade until it eventually comes back. This is the intellectual retard strategy. People that do this have no business trading stocks. Their similar to that monkey that grabs the fruit and then the trap closes on the arm. If the monkey would let go of the fruit, he could run away from the trap. But the monkey just can't let go.

Time is value, it is the material life is made of. Way back in March of 2000 the Nasdaq traded at 5,000. Today it trades at less than half that at 2186. So for the last 10 years, you are still waiting for the market to come back. These are 10 years you could have been investing and making money, eternally consumed. At only 10% a year, you could have doubled your money. But it's worse than that.

The majority of retards that use this stratagem can't do arithmetic. Let's say the Nasdaq dropped from 5,000 down to 2,500 or 50%. The majority of monkey retards believe if the market goes up by 50% they'll get back to break even. Not so. The stock market would have to go up 100% to get back to 5,000.

Never use buy and hold on a losing stock trade. Get rid of your losses as quickly as possible.

In the episode below I chat a little about the ridiculousness that is value investing.

Category:

Education

Tags:

• losing trades

[bkahlin23]

The problem isn't that value investing doesn't work- its that your value invest like a technical analyst. the stock was undervalued and if you would of held it until March 03 of this year (8 months from the article) you would of made over 27%. If you would of combined fundamentals with your beloved technical analysis and bought after the immediate drop after the article you would have made 55%. CNO was a huge winner and made anyone who played it a lot of money.

[StockTradingMaster]

@bkahlin23 Ok so in 8 months I would have made 27%. Instead, I sold it, bought an even better stock that made me money, sold that, bought another better stock, made money sold that, bought another stock, made money sold that, and ultimately am up over 160% in the last 8 months all because I let go of this stock and freed up my money in what led to a successful string of wins all generated from technical analysis. You see, that's why I'm the master and you are the student.

[kuroisoba]

garbage! reeeeaaaaaaaallllllllllllyyyyy­yyy garbage! stock price never equals company value. I trade by 100% technical. fuck the value,fuck the fundamentals.

I read a chart then trade.

[SGDeGalvez]

first of all, reading yahoo to find your undervalued stock is a mistake.

[requiem777]

Nice vid. I'm a total noob investor but I'm really glad I never got suckered into fundamental/value investing. Before I invested money, when I was studying, I did a lot of analysis and backtesting of TA vs FA and TA kicks its ass. Of course its prolly best when they both line up, but it seems like bad technicals will beat good fundamentals every time. Of course buying any stock in a down trend in a bear market is a really bad idea, as a noob I'm shocked people fall for crap like that.

Thanks

[rpur441044]

Exactly,right on target...i was going to say wedge or triangle before you pulled back for larger view.Thank You.