Let's say I buy a stock at $11, which my analysis shows should go to $13 in about two weeks. Instead, it drops down to $9 about two days later. I am disappointed and want to get out, but do not want to take a $2 loss, so I hold on to it, hoping for a rebound. A week later, it goes back up to $11, which would allow me to exit flat. Do I sell it? NO. Instead, I feel that if I hold on to it a little longer, it will still go up to $13. So what happens? I hold on to it and it drops back down to $9. The cycle starts over. What is wrong with me?
What is wrong with you? You need to let me know what your next trades is going to be. If you just keep doing what your doing and call me before you do the trades, I can make money on the other side. I'd be willing to give you 10% of the net. :eek:
An easy fix for your problem: GTC Limit Orders Put 'em on. Let 'em ride. Fuggedaboudit. You will be amazed at how well this works w/o the need to trikfuk your every trade. Some will argue, but it works for me!
Probably nothing. Your problem is not uncommon. But sooner or later you'll be faced with a major drawdown, not just little jiggles in price. Common mistakes that people make: Refusal to take a loss. Desire to be right. Refusal to accept what market is telling you. No decision made as to what criteria (time, price) must be met in order for the trade to be seen as not working. Attachment to trade as 'work of art' (depends how long the analysis took, how difficult it was to overcome fear of putting on trade (if any) etc.) There are a ton of others, and books have been written on this topic. Don't know how long you've been trading, but you might want to search this site for suggestions on useful reading material. You should investigate the use of stop loss orders. They will pretty much free you from emotional baggage (such as 'hope') and eliminate psychological variables from your trading. Using stops will make questions such as "What is wrong with me?" irrelevant. (Hope is a normal human emotion, but it really has no place in trading.) The trick, of course, is proper placement of the stop. That depends on volatility of the stock, support and resistance levels, and personal comfort levels, among other things. Again, a subject for further research for you. .
It has already been pointed out that your risk control (i.e. stop loss) is faulty, so I won't repeat. That's probably the most important mistake. I don't know how you are coming up with a target price, but the target is likely nonsense. I don't believe there is any reliable (i.e. tradable) way to tell how far a price will move or when it will get there. No matter where you set your stop loss and where you take profits, it will be too high or too low. If that bothers you, you may not last long as a trader. Good luck!
Nothing is wrong with you, but your actions/strategies are not determined, and you're waivering. Strategy is how you get to your goal. Have you set an explicit goal for the trade ? And do you have the strategy for this trade ? Making it explicit, repeating winning strategies, and making them complete, will help you. If you still don't enforce your strategies, try getting less emotional about your trade - take a beer! I know it sounds 'controversial' - but one beer might calm your nerves. If you are nervous and can't commit, try something that removes some of the tension. Watch something that makes you laugh, or listen to some music that makes you happy, energetic or focused. Then revisit the trading strategy. If you are trading from home and have a swimming pool ready, jump in - do a few laps and get up again - refreshed. Or do some situps/pushups if you like physical training, it get's your adrenaline up. It's all about getting that negativity out, and getting in charge again - feeling on top of things.
You shouldn't let that stock go to $9. It has to go up 44% to reach your target in less than two weeks which is very improbable. Therefore you have to sell the stock when is goes to $10 and reevaluate the situation or better look for another deal. Even if we assume that the stock can go from $9 to $13 in less than two weeks, then it must be a very volatile stock and you should have a rather small position in it, in which case a $2 per share loss shouldn't bother you, right ? Or think about it this way - if the stock is that good why did it fall 18% to $9 ?!? Obviously the smart money is selling the stock and does not share your bullish outlook. In other words you were wrong! You bet that the stock will go up $2, instead it went down $2. The only right action - sell it! Then sit back in your chair and look for the next trade You must be in the best possible opportunity at any single moment. If you can't find a very good trade the best choice is to stay out! You make money because you surrender yourself to the market only when there is a very high risk-reward trade in which you are very confident. Everything else will bring only volatility in your equity which will make you feel exactly the way you feel at the moment and I know that it ain't fun
"Let's say I buy a stock at $11, which my analysis shows should go to $13 in about two weeks. Instead, it drops down to $9 about two days later." I know this is probably a hypothetical question you asked but I am worried about your whole approach. I personally don't know where a stock will be in 2 hours never mind 2 weeks but that doesnt really matter because I know what my risk/reward ratio is, what my win/lose ratio is and I have one or two setups that work at least 50% of the time. With careful use of stop loss I can have 2 or 3 losing trades for every winner and still come out with a profit in most instances. You never said if you had placed a stop on your order, but I presume that if you had then it must have been of a greater magnitude than your expected profit of $2, otherwise you would have been stopped out at $9 or above. I think you should go back to the drawing board for a while and sort out your systems prioritys which should be 1. Preservation of Trading Capital (ie. Risk management) 2. Risk/Reward aim at least 1.5/1 preferably 2/1 3. Your actual stock picking method If you have good records of your trades you may be able to work those figures out, if not you will need to paper trade or minimise your position size until you know what your win/lose ratio is, how you can manage your trades to minimise the size of your stop loss (Trendlines, Support/resistance MAs etc) As this post is in the Trading Pschology section I guess you were looking for insights into how you can control your emotions and cope with losses. I found that once I forgot about Charts and Fibs and Stochs for a while and concentrated on (the boring stuff) like Risk management the pschological problems take care of themselves. Good luck
Could it be possible that the market makers are pushing it way lower just to get everyone out so they can then push it back up and make a killing? Thanks