Sunday, February 27, 2011

Sell the Loser or Sell the Winner first?

If you need the money and the only option is to sell some of your shares, which counters would you sell first? The one that already making money or the one that is in the losing position? You might take out the list and compare the cost with the current market price, most of the people tend to sell the stock that already making profit and retain the worst performing stock in their portfolio.  Almost 90% of people will do this, that's why only 10% of winner making money in stock market because the winner let the profit run but cut the loser very early to limit their down side.

Listen to the market, it can talk to you. When you buy a stock and is making money, the market is telling you are right, so let the profit run. When the trade is losing money and getting worse, the market is telling you to get out. A bad trade is like a dead fish, the longer keep it, the worse it smell.

Investor need to think like a winner, the winner don't add to or "average" losing position. They sell the losing trade and find the new opportunity. They may add to the winning trades, always remembering that any time market can turn and prove them wrong.
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