Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Trading, How to Be A Better Loser

InvestorEducation / Learn to Trade Oct 25, 2010 - 01:55 PM GMT

By: David_Grandey

InvestorEducation

Best Financial Markets Analysis ArticleAs in being grounded in reality. The stock market is a two way street. Sometimes your the bat and sometimes the ball and much like life being a dance so is the stock market.

We can’t tell you how many sites we’ve been to and subscribed to in the past but we can tell you most spend very little time if any talking about their losing trades. Let’s face it there is not a site or investor on this planet who has not gone under water on a trade.


So today let’s talk about being a loser and how to be a better one.

How to Be A Better Loser

Over the weekend one of our subscribers mentioned to us that we always talk about the ones we’ve made money on but what about the trades we’ve lost on. And he’s right so let’s take a look at a stock we lost money on in the recent past.

Losing To Win — RVBD

Back on August 19th we went short RVBD at 35.41 when it broke an uptrend to the downside off the August lows after testing some overhead supply as shown below.

Since that time this issue was one that ended up being a thorn in our side and we fought with it for some time. Needless to say that issue walked its way up to 48 and change.

When the rest of the cloud stocks rolled over this issue really didn’t roll over to the degree that some of the others in that space did. To make a long story short in that pull back to the 42 level we walked away and took our loss on the issue.

Here is what it looks like now.

For us it was a successful trade, why you ask? How can losing be a successful trade?

Simple, we stress position size risk management and it is always for us of the utmost importance. That position made up 6.5% of our overall portfolio when we shorted it. In the end we lost 18.7% on the position on its own. While on its own that sounds like a lot, but the TOTAL IMPACT TO THE OVERALL PORTFOLIO was a whopping 1.2 percent loss.

Furthermore, since that time this issue has bounced off of that support level (where we walked away) and not only retested its highs, but on Friday it got an earnings pop and that took the issue to new highs with follow through today.

So where is the losing to win part? Simple, we waited for a pullback, took a loss, and walked away. Had we not used that pullback to walk away that loss we took would have been much much greater.

We lost 18.7 % on the position on its own, overall impact to the total value of the portfolio was 1.2% or -$1,995.00.

Had we not did that? The loss on the position would have been (at today’s highs of 56.80) -60% on the position alone or -$6,417 dollars, total impact to the overall portfolio would have been 3.9% for a difference of $4,422 dollars. This what we mean when we say lose to win.

The point we want to make with this exersise is that of the importance of Position Size Risk Management — it’s a lifesaver. No matter what you do, where you go, wherever you trade or however you trade this is the absolute best fail safe for when things go awry and over the next 100 years will continue to be no matter what you do. Use it — it’s a tool for you no matter who you are.

By David Grandey

www.allabouttrends.net

To learn more, sign up for our free newsletter and receive our free report -- "How To Outperform 90% Of Wall Street With Just $500 A Week."

David Grandey is the founder of All About Trends, an email newsletter service revealing stocks in ideal set-ups offering potential significant short-term gains. A successful canslim-based stock market investor for the past 10 years, he has worked for Meriwest Credit Union Silicon Valley Bank, helping to establish brand awareness and credibility through feature editorial coverage in leading national and local news media.

© 2010 Copyright  David Grandey- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in