Some companies it's difficult to see the big collapse coming (strong fundamentals sometimes aren't as strong as I think they are), and difficult to know whether things or temporary or not, but yes, panic sells are generally bad, bad, bad in my experience. I have a history of selling lows that I'm working to combat/counter and am getting better at it with awareness. (But like a say, sometimes selling a tanking stock works out well - recent examples include LQDT and GEOS that were gut kickers for me that kept getting worse).
There's quite a bit to Buffett's saying "be greedy when others are fearful, and fearful when others are greedy." It's very difficult to implement in practice - requires focusing on our own psychological state. I panicked in the oil price collapse of Oct 2014 on several stocks. I made mental note of the my "fear" state of watching prices drop 3-5+% a day for days on end. I tried to tell myself I was exiting orderly, but I was afraid of downside as it was happening. I was not looking at buying more. When I get that feeling I instead need to be looking for opportunity. Very difficult to do in practice unless using mechanical systems or if it suits your personality.
as an example: I'm holding an overweight position in oils right now. It's difficult to know if the current situation is temporary, ongoing, improving, or getting worse. I think "eventually" oil price will be higher, but it could be so far in the future that it's not worth being invested now. Or now could be a great time to be invested. Fundamentally sound companies can quickly become unsound if business conditions stay bad for long enough. Ex: Coals were high flying and looking great not long ago - now they are dying.
In my discretionary buys on longer term positions I've found it better to simply use a wide mechanical stop (20-25% or so). There also seems evidence that a 200MA laid over the index is a good stop also - simply avoiding stocks when index is below it's 200MA. Gary Antonicci's new book discusses this strategy.