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Saturday Blog Post: How To Deal With Loss

Wrote this on Thursday to share with you all in my Saturday post. I have had quite a few messages from newer readers going through rough patches and wanting to know how to handle losers.

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For the ROTY model account it`s readily apparent that many of our positions are currently in the red. In times where positions are bleeding, it`s up to us to continually reevaluate each thesis to make sure they are intact and take advantage of weakness where it suits us.

Readers have to decide when to cut their losers as well- often times there is nothing wrong with holding a large cash position if it helps you sleep well at night while continually scanning for new opportunities. If you recall, before our big September we were in the red quite a bit and stuck to the strategy. 

Lastly, if each trade you make is doing very poorly, the answer is NOT to enter a different stock trying to recover those losses. That kind of mindset will likely end up with you losing more or making risky decisions that will bite you back in the end at some point.

Take a breather, step back and consider your strategy/plan. What`s not going well?  What went wrong? What do you see in your trade journal? Are you keeping one?  After sufficient reflection, cut the losers you need to cut, start from a blank slate and use smaller size positions until you get your confidence back.

Readers often tell me they want to make X amount of $$ per month or annually. I respond that that`s an easy way to stress yourself out. Focus instead on every decision, every buy and sell, making good thoroughly thought out decisions, forming a plan and sticking to it. Consistently good decision making leads to consistent profits. Some of my best trades are when I decided to cut a loser and move on to a better idea instead of marrying the stock. Other have been when I reevaluated a thesis when the stock was swinging around wildly (ie. Zogenix), decided my reasoning was sound and stuck to the plan.

Apologies for the long rambling- just my two cents as always.