Corona Del Mar, CA
"It's already down. Shouldn't I wait to sell"?
"No," I said. "It could just keep falling."
"It's Murphy's Law that small losses will turn into big losses if you don't follow the rules."
"Fine," she said, letting out a sigh.
Thankfully she made the trade and got out...but it was the toughest trade to make...the one that is responsible for many trading account implosions. I've been teaching my girlfriend how to trade Bit-coin using GBTC. It's weird for me because she trades though the IBKR app on her phone, and everything is so small.
I have to squint when I teacher her about order types. On her first GBTC trade, she made around $900 so she's hooked. She was up about $500 on this trade, then down $500 when the sell signal came. She absolutely didn't want to take the loss even though the strategy shows 32% losing trades.
Emotion took over logic for a minute.
I've done it myself.
Here's what happened with a trade in NUAN. It was the year 2000, and tech was going insane. Everything was exploding higher, and I was extremely bearish. Yet I was doing some swing trading in some "dead" stocks because the volatility was offering so many deals.
Stocks would fall 20%, then rise 30%.
At the time, I was eyeballing the charts, drawing lines and playing connect the dots...a little bit of news. So basically, just flying by the seat of my pants like most would-be traders. I bought a few hundred shares of Nuance (NUAN) on the dip. I was up a generous amount.
"Yeah baby! Ch-ching!"
Then it went a bit lower...then lower..."It's an even better deal now!"
I started getting nervous, and told myself I'd sell if it hit its 200-day moving average. The next day it gapped below the 200-day, and I just froze.
"I'll sell when it goes back up to break-even."
A swing trade ended up turning into a year long trade, because that's how long it took to go back to break-even. I was down something like 80% at one point as it turned into a penny stock.
Not only did this dog ruin my P&L, but it also cost me many opportunities to make money. I could have been in and out of a lot of other trades with the money I had in NUAN. Traders tend to forget about opportunity cost.
That's when I swore I'd write everything down and follow a system.
That mistake eventually made me realize that I should become a 100% systematic trader. Me trying to out-think the markets was just hubris. I don't have inside information unlike some of these fund managers. *Cough*Soros*Cough*
Perhaps you can relate to this story?
It's wayyyy more common than you think. Having a winning position turn into a loser that you have to sell is the hardest trade in the universe...but one that you have to master if you're going to make it. These days, I'm like a cold blooded killer with zero emotion when I make trades, or play cards with the fellas.
Oh, and that Bit-coin (GBTC) trade? It's currently 3% lower...so now she feels relieved.
P.S. Want to learn the secrets of systematic trading? Such as 90.1% winning trades with just a single line of code? And hot-list ranking to fast-track your retirement? And weird trading edges for an almost unthinkable advantage?
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Step 5: Additional Resources
The Relaxed Investor (The simple strategy proven to work since 1926. Downloaded by over 200,000 readers)
The Ghost of Bernie Madoff is Not Yet Dead (Is your broker on the naughty list? Many traders have no idea they're being sold out)
The Ultimate Crash Detector (The strange weekly report that helps predict crashes. LIVE trading signals since 2006)
Portfolio Boss User Guide (Our flagship strategy building platform User Guide. See what it can do to help you on you quest for F U money)
Trading With Other People's Money - Coming Soon!
Bit-coin for Busy People (How to get started with Bit-coin in under an hour without the complicated new exchanges, high fees, and complicated wallets)
Disclaimer: The results listed herein are based on hypothetical trades. Plainly speaking, these trades were not actually executed. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under (or over) compensated for the impact, if any, of certain market factors such as lack of liquidity. You may have done better or worse than the results portrayed.