Letting losses ride and living in denial
- Thread starter a529612
- Start date
use protective stops, they are easier to do it with.
i think a lot of people (myself included) got blindsided in the past few weeks. markets have been more or less rangebound for a long time... have read avg hedgies down 2-8%.
ask yourself if the trades you are in are trades you would enter right now confidently? if answer is no - cut the loss - go out and get real drunk and start fresh. 120 to 100 is manageable. 120 to 60 aint.
gotta take your lumps and move on if you dont like your positions. you will feel better once you do and will be able to be objective again. that money is gone.sadly.
best to you
ask yourself if the trades you are in are trades you would enter right now confidently? if answer is no - cut the loss - go out and get real drunk and start fresh. 120 to 100 is manageable. 120 to 60 aint.
gotta take your lumps and move on if you dont like your positions. you will feel better once you do and will be able to be objective again. that money is gone.sadly.
best to you
Quote from a529612:
My equity was at 120k in Jan but now down to only ~100k. I don't have problem pulling the trigger on a small loss but how do you pull the trigger on a big $20k unrealized loss? It's easier said than done...
A....so right now it is unrealized...you basically have to review ALL the criteria that caused you to put the position on. If that criteria has changed then perhaps you need to scale out the loss. If however fundamentally your opinion of the market, stock or situation has not changed (and you aren't BS..ing yourself) then you just need to hang tough. The market is a bully that will try to unseat your position and while there are those times you are just plain wrong so you need to close (0ff-set in riskarb terms) but other times you are FUNDAMENTALLY right and just need to hang tough!!!!!
DOUBLE DOWN BABY!!!!
Try read up about trading pyschology.
It is pretty well-known that after a sudden loss of 15 to 20% of your equity (e.g. stake in a poker game, an open position with draw down from its all time high, etc.), most people goes into denial mode.
Nothing matters until after,
1. the position is liquidated
2. the position return to exactly where the hoper wants
#2 is interesting because that changes over time - from back to the old high (the best case), then down to breakeven at level before commiting the position (the not feeling bad case), then down to an acceptable loss (its painful but acceptable), etc.
Now, think hard and take yourself out of the position for a moment. Can you skip the part of denial and going straight to the point where you can think of your acceptable loss?
Then think about what is an unacceptable loss to you.
There, you will discover what is the correct thing to do.
It is pretty well-known that after a sudden loss of 15 to 20% of your equity (e.g. stake in a poker game, an open position with draw down from its all time high, etc.), most people goes into denial mode.
Nothing matters until after,
1. the position is liquidated
2. the position return to exactly where the hoper wants
#2 is interesting because that changes over time - from back to the old high (the best case), then down to breakeven at level before commiting the position (the not feeling bad case), then down to an acceptable loss (its painful but acceptable), etc.
Now, think hard and take yourself out of the position for a moment. Can you skip the part of denial and going straight to the point where you can think of your acceptable loss?
Then think about what is an unacceptable loss to you.
There, you will discover what is the correct thing to do.
Quote from Sanjuro:
Double Down and when it bounces, you can breakeven.
Works for me 9 out of 10 times.
"Losers average losers" - Paul Tudor Jones
http://www.turtletrader.com/losers-average-losers.html
Trading too big, cut size and go back to basics.