This Content Is Only For Subscribers
If you do not cut every loss quickly, sooner or later you will suffer some very large losses. I have known some highly intelligent and educated men who were wiped out because they invested on margin and had not sell discipline. Brains, education, ego, stubbornness and ride are deadly substitutes for having and following sound selling rules.
The problem is, you always hope to make money when you buy a stock. And when you have to sell and take a loss, you find it gut wrenching and hard to admit you were wrong. You had rather wait and hope the price will come back.
To make matters worse when you do try to cut losses, half the time the stock will turn around and go back up in price. Then you are really upset. You conclude you were wrong for selling and that the loss cutting policy is a bad one.
It took two to three years of figure out how to put the whole system together. It does not happen overnight. For most people the learning curve is about the same. As the years go by, you should get better and better at stock selection and the number of individual 7% or 8% losses should drop significantly. Plus, these small losses will be offset by much larger profits from your big winners.
Most people think that investing in a college degree is a sound decision. Most people think of it as a waste of money because they have hopes of having that degree pay off in future success.
Anything worth succeeding at takes time to learn. Professional ballplayers are not make is three months and neither are successful investors. The only difference between the successful person and everyone else is terminating and persistence.
If you are worried the old adage, sell down to the sleeping point, is the best way to relive some pressure. You do not have to sell it all, just sell something so you can sleep at night.
If you cut all your losses at 7% e 8% below your purchase prices and then sell just a few of your stock s when you are up 25% to 30%, you can be right once and wrong twice and still not get into trouble.
Your best performing stocks should be held longer for a larger possible profit. Always sell your worst performing stock first, not your best performing stock.
Pick up only the very best market leaders, companies in the leading industry groups that are #1 in their respective fields and have strong return on equity, profit margins and sale and earing growth.
