Cutting Stock Losses: Not Painful actually

The recent volality of the stock market has taken many people by surprise. I had experienced this same euphoria 7 years ago when I first started on unit trusts, and bought a unit trust that crashed badly. I still have that to remind me of my mistake in my inability to cut losses. This is a quick update because I’m really up to my ears in work, studies and courses.

I finally cut my recent losses completely, because the stocks went below 8% of the price I bought them at. 8% is the cut loss percentage for traders. However, because I was unable to sell them at the prices I want, I had to sell them at a lower price, so I chalked up a bit of losses, though they are manageable losses.

I’ve learnt my lesson on cutting losses, because the first time I tried for my first stock, I did not do that completely. It was just like having a gangrenous toe and not amputating it, then letting the wound fester until you had to cut away the entire legs. I had let the first stock plunged until I finally saw the light, and sold it. I had misunderstood MACD until recently.

As for the other two stocks I held, they were just slightly below the cut loss price, so it was ok. Strangely, I felt calm when I sold my stocks, which meant I am feeling detached. I don’t feel the panic that newspapers like to write about in their headlines: Panicky speculators sold at a loss during stock market free fall.

Interestingly enough, I received news that there are many traders who are laughing their way to the bank because they had made huge profits from shorting the market. One even made half a million! I have not learnt how to do this, so even though I had anticipated the crash, I did not act on my instincts. This is something I have to improve on.

The great part is I’ve overcome my psychological barrier on protecting my capital. When I have more time to take a breather, I’ll load up my ammunition and get started again.

Sarah Tan - SingaporeProfit.com