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Losses....the biggest problem we have

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Not applicable
Losses are the biggest problem traders and investors have...obvious aint it?...well not really cause it aint the losses in themselves that are the problem. I would argue that as a trader you are not doing a good job if you dont regularly take losses...So if its not the losses themselves what is it? Its accepting the small losses that the problem...cause if you dont accept the small losses they turn into big ones. I heard an idiot an I mean a real big idiot who was being paid a fortune to manage ppls money on teevee this morning say..."well what you shouldnt do now is turn your paper loss into a real loss"....how absofreeking bloody stupid is that? His fund was 41 % down BTW...more than than the benchmark. So because he wasnt prepared to turn what he though was his 10% "paper loss into a real loss when he could he now has a 40% paper loss...well I got news for him...cause its not his money it may be a paper loss but for the ppls money he mismanaged it is a real loss...some of then need to retire in a few months time. This is and was the biggest problem I have as a trader....I would 10 k a day easily....but when I made a 2 K loss I would try and make it back...double up, triple up, take risks, keep an overnight position...do whatever it takes to negate the loss....all to no avail cause the small loss would just turn into a bigger loss. I recall one day I had made 5k in the morning. Went out to lunch. Came back and traded a bit...lost 1.5K near the close....so I just added to my position ....when that didnt work I just left it open overnight...the next day I was 20K in loss....oh my God I couldnt take that 20K!!!!....it was a gap day and I was so sure the gap would close...it didnt ...20K tirned into 50K which turned into 150K....I recall the day vividly....1.5 K loss turned into 150K in a day!.....so please do turn your paper losses into real losses ...the sooner the better....bloody teevee idiots....
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23 REPLIES 23
Electrox
Super Contributor
Thanks for sharing that Chartist. It seems that most People are not trading to make profits but instead are trading to be right first time round, and im sure thats were most peoples big losses come in.
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NJ_1
Frequent Contributor
Chartist, you clearly enjoy sharing your experience and knowledge. Why don't you start a blog where you can post your ideas, general wisdom/experiences and charts? It will expose you to a bigger audience too.
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john_1
Super Contributor
I totally agree with you....I have a mental idea to help me with this problem....In business and I veiw trading as a business. Your profit is a factor of sales vs cost of sales and wages make up a big part.In trading (capital growth focused) for the price to move another market participant must buy/sell at a price that improves my possition.ie I am dependent on others for my profits. When I find myself in a possition that is not favourable..in a lossing possition I cut it as soon as I can and view that as having pade wages..to be profitable in trading one has to pay less for the services of other than they give to you. DONT EVER TAKE BIGG LOSSES...in a year and a half of trading the alsi the biggest loss I have had on one trade is R7000 per contract.
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MenuOption
Frequent Contributor
Hi C, yeah, and it is actually worse. Because if you take a 10% knock, then you need to make about an 11% profit (from the new position) to be back at the original level.
But if you take a 40% knock, you need a 67% increase again to break even. 67%!
So, your point to get out of loosing trades very very valid.
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Wizard
Super Contributor
Agree 100 %. Unfortunately lots of ordinary people will watch TV and will agree on everything the guys in the shiny costumes say.
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SimonPB
Valued Contributor
somebody retiring in a few months and still fully invested in the market is a troll. Not to disagree with what you're saying, but people need to also take responsibility for their actions.
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Not applicable
Hi chartist, and other traders. I could really use some words of wisdom regarding managing losses. Do you have a blanket stop loss strategy when entering a trade? (e.g. 2% on underlying) I am also interested in finding out what percentage of trades are wins vs losses (is 40% losses a high number?)
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Not applicable
yes of course....but now this is where I get angry....when I went to see a Stanlib advisor with my mom to invest money from the sale of her house the guy said "mam we do it all for you....we manage your money and while we may make a small loss your money will be safe" almost verbatim....BTW I notice that the Stanlib fund is now at the bottom of the martix...while ppl shoudld take responsibility there is no excuse for outright decption....My Mom would have lost 500K had we listened to this man...which means she would not have been able to buy into a retirement home...
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J12
Frequent Contributor
Fantastic point. I've heard that the biggest problem stock pickers have is that they don't sell their losers in time. The winning stocks do really well, but the losing stocks drag their portfolios down a lot. This is the same problem I'm having at the moment. I bought a share on a high, and I didn't sell when it dropped so now my entire portfolio is showing a loss. You need a lot of discipline to take a loss, but it's necessary. I think it takes a while for most people to not make emotional trades and some get there faster than others. Also, you need to do your homework properly if you want to buy a share. For traders, you probably need to read the charts correctly and for (long-term) investors, you need to assess the fundamental value of the company. If you're absolutely sure that you got these right, then it's worth holding on to a share that's showing a loss because the market will correct itself.
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Jobarshares
Contributor
Somebody should go burst this guys bubble. Tell him his 41% is not on paper, unfortunately. 41% of the money of the protfolio is freaken gone. Then get him a room, get the investors in, and lock the door. Let him explain this 'paper' loss to them. It pps me off that these experts think that holding onto your shares even though they are dropping like a stone, somehow gives you a ticket to make all that back plus profits in the far future (5years plus). It's like buying a lotto ticket, on paper, I could be a millionare, in real money, I just lost R10 of my money, and that is for giving myself 4 paper chances of being a millionare.
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Blik
Super Contributor
I like that post Chartist - it teaches us that we have to be in control of our own portfolio as much as possible. I am only happy with "paper losses" when they dont mean anything to me; I know my own time frames and when I need to get out - hopefully at least 20 years from now. Even for investors - one of the golden rules is not to be in love with the shares you own.
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barry_1
Super Contributor
Clear.consise,to the point,well written....I fully agree with you....just wish i would always apply those principles to m'self...I suppose we all occasionally get caught holding when we should sell!
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YNWA
Super Contributor
Money Managers...too true Chartman....& they would have had the audacity to charge your mum "fees" for the pleasure....income targets down?..lets churn a few portfolio's, that will look after the bonus!...majority of pensioners money is in the "safe" custody of "professionals" so by proxy Simon is calling them trolls...I like!....lower than the shadow of shark schitte me says....CONTROL THE GREED and most of the fear subsides...taking 60% of a move is good money in anybodies terms.
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Not applicable
Ja...I had a good month last month...one small loss day. Does that make me happy? yes I am chuffed with myself but am I content?...no I am worried....I havent had to deal with a loss emotionally for a while...how will I cope? Would be much better if I had more loss days ....it may also mean I am not fully exploiting opportunities when they present themselves....If you consider making losses as part of your job I didnt do mine properly last month...
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Wizard
Super Contributor
They all look so attractive..It's your responsibility to find out who they are what they do and so on.It's another investment. If u go to the page of Lehman Brothers u can still read about how great they are.why should u invest with them, why should u start a career with them!!! Not even the secretary had enough time to close the site down!! http://www.lehman.com/ U can read there the 5 beautiful introductions towards Lehman that all made sense just 2 months ago!
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Jobarshares
Contributor
Easy solution to your problem Chartist, calculate what you are wiling to loose, and send the money to me :)
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Blik
Super Contributor
Hey Chartist - am curious: how much of a role / part does hope play with your trading. I know it shouldnt be in anyones strategy - but its there, usually hiding behind some investor or TA jargon. When one of my shares drops, I often "hope" that it will rise and in that "hope moment", I have missed a sell. Barry may have hinted at this earlier.
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asylum
Super Contributor
Ja fully agree, i started out with nothing and ive still got most of it left.
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ZerOgravity
Contributor
Recently the company I work for sent us a news letter on the current market volatilty. It said that we shouldnt be alarmed that our pensions have nearly halved because " the market has had at least eight instances of crisis and will inevitably pick up" .Now if you considering retiring who would choose an actual loss versus a hope that it will pick up. Most people would choose Hope. But surely it is not about hope but about time really, if you are young and you are an investor (not a trader) then converting your paper loss into an actual loss should surely not be the way the go coz then we walk out feeling hard done by the stock exchange.Eventhough I think stop losses are useful - what do you do when a good company loses half its value and is suffering because of volatility and panic instead of poor performance. Instead of picking up "perceived bargains" should we not choose good shares with staggered purchases and then forget the passwords to our trading accounts?
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