Tuesday, 3 September 2013

When should you cut loss

When market is on the uptrend, everyone is happy. But no stock market goes up forever, at some point it will correct, whether big or small ones. When the trend turns the other way, most of us will struggle emotionally on whether should we take profit off the table or to cut loss for the losing trades. This is why Mr Market is so interesting and everyday, every events bring different end results to Mr Market due to human emotions.

Take for e.g., this trade which I had made during October 2012(the first red arrow on left). At that time, I bought ishares silver(SLV) at about USD33. Also note that the 50MA has crossed above 200MA, so trend should have been reversed to uptrend. 
However, in Feb 2013, this had changed with 50MA below 200MA. At that point, instead of selling when TA told me to, I was holding onto hope that silver will ride up again. But it never did, and I finally cut loss at about USD27(the 2nd red arrow), sometime in April this year. 

Looking back, if I had not cut, I would have lost more(on paper), cause silver actually hit a low of USD18. And because I had cut loss in April, only then I had the capital to buy again recently. 

Related post: silver trend reverse

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