Original link: https://blog.forecho.com/what-should-i-do-if-i-have-lost-money-in-a-stock-crash.html
introduction
The recent market downturn, QQQ has already entered a technical bear market, and even SPY has entered a technical bear market. In this article, let’s talk about what to do if the stock plummets and loses?
Life-saving 4 strokes
set stop loss
Set a stop-loss line for each stock and sell the stock if the price of the stock falls below the stop-loss line.
What is the stop loss point? One suggestion is 8%? Why?
Because when you lose 8%, you have to increase by 8% to make a return. But if it falls below 10%, the return will be 11%. A 15% drop would return an 18% return. Once you lose 50%, your return needs to go up 100%. Remember that the bigger the loss, the harder it will be to recover.
Many people worry that the stock will take off as soon as they stop losing, but you have to know that the stock has the same probability that it will continue to fall. If you stop losing because of this, your principal will keep decreasing.
Missing out on a stock won’t affect your long-term investment performance in the long run. There will be opportunities in the future, but if a stock costs you a lot of money, it will take you a lot of time to get it back.
On the road of investment, remember not to lose your principal, and not stopping your losses will only make yourself an investment layman.
Don’t watch stock news
Have you ever encountered such a situation, when your holdings are falling sharply, you go to the Internet to find good news, trying to convince yourself that the situation is not as bad as you imagined, and the stock will rise soon. Then convince yourself to ignore short-term volatility and be a long-term investor.
But have you ever thought that your judgment is wrong? What you see or hear may be just what you want to see or hear, and then keep convincing yourself.
Jesse Livermore said, “The market can never be wrong, only human nature can.” If you lose a certain amount of money, it means that you are wrong to hold the stock at this moment.
Turn off the market noise, examine your investment strategy more rationally, and make a choice.
Summarize the lessons of failure
Summarize the lessons of failure and learn actively. Many people only know how to feel sad or complain after a failed investment, instead of analyzing why they failed and how to avoid the same mistake next time.
We summarize the reasons for failure, not only in writing but also reviewing frequently. If we want to become a professional investor, we must understand our shortcomings and constantly correct our mistakes.
The specific method is to record the reasons for buying and selling, and then summarize the reasons for failure, and continue to learn.
In addition, we can also read professional investment books to improve our own investment ability. I created a list of investment learning books on Douban, and interested friends can learn together.
hibernate
The monkey market is characterized by skyrocketing ups and downs. It fell for a week, but it rebounded for 2 days. I was afraid of stepping out of the market and wanted to make a quick return, but as soon as I entered the market, I was trapped again, and the losses were getting bigger and bigger.
You think it’s going to go down forever, but as soon as you go short, the stock bounces back in a few days, and you fail again. So sometimes the easiest but also the hardest thing to do is to stand still, operate less, and see more.
Jesse Livermore (a great speculator of the 20th century) once said in “Into My Trading Room”:
Sometimes you need to go long, sometimes you need to go short, and sometimes you need to go fishing.
Fishing means doing nothing and waiting patiently for an opportunity to come.
Turn over 3 strokes
Find good targets
In the case of a poor market environment, it is time to test stocks more. Patiently analyze the fundamentals of stocks and find value investment stocks. One of its characteristics is that it is more resistant to falling, and it falls less than the index.
The stocks that are still rising against the trend at this time may be the heart of tomorrow. Once the stock market regains confidence, these stocks may rise faster than the broader market. For example, Tencent in 2016.
Find similar stocks
Because a stock may be wrong, but if it is in a strong sector, it can help you confirm the direction of the market.
Find the best time to buy
Even if a stock can go big, you can lose money if you buy at the wrong time. So we have to learn to find the best buying time, which will be discussed in detail later.
at last
Finally, to summarize the content of this article, it mainly describes the 4 life-saving strategies for stock plunges and losses, which are:
- set stop loss
- Don’t watch stock news
- Summarize the lessons of failure
- hibernate
By the way, I also summarize the 3 tricks to quickly turn over:
- Find good targets
- Find similar stocks
- Find the best time to buy
This article is reprinted from: https://blog.forecho.com/what-should-i-do-if-i-have-lost-money-in-a-stock-crash.html
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