How Do You Get Over Losing Big in the Stock Market

[DC Mom]

I started investing in individual stocks a few years ago. Initially I was successful, picking some early winners and gaining a fair bit of money.

 

Heartened by my early gains, I kept on putting in more money. Twice before I had big losses. Somehow I rebounded to the break even point or close to it those two times. The last time I was able to do it, I was close to thinking I needed money for a big expense coming up, but I thought I would be in better shape if I just took a quick stab at some quick gains at some companies down on their luck lately and that I could collect on a quick bounce.

 

Well I had some bad luck and one of my biggest investments went bankrupt over the course of a month.

 

Long story short, I kept on thinking things would pick up on some other ones but no matter what I touched, some bad news came out and the stock started tanking. Now, I am at a low point. I am lower than I have ever been before. Part of me is like I should just close up shop, liquidate everything, but it's very hard for me to do it.

 

I wonder if I would be throwing the baby out with the bath water and be selling too soon on some of these stocks. Also, knowing that there is no hope that things will turn around is crushing me. I worked so hard to save up all this money and now it's gone out of hubris.

 

There are a couple of key moments where I made stupid decisions... where I was about to pull out or hesitate on a risky move, but I made the wrong choice anyway.

 

I know it's lame to bring this up here on a Bills message board, but it's too hard to tell people close to me how stupid I was and the mistakes I made, esp. since I told them when it wasn't so bad earlier. I figure this cross-section of fans here might include some people who have been where I have been and might have some advice.

 

(What is left: EWJ, EVST, LU, F, GE)

 

It has taken over my life, obsessing over information, looking at whether I should trade or not. It's affecting my work quality and my social life.

[Pete]

I lost a huge amount in the stock market crash. You have to lick your wounds, step back and learn from your mistakes. A good book to read is William Oneil's How to Make it in Stocks. Always have an exit strategy. Lose your ego. Dont get attached to a stock. Cut your losses. Minimize risks. Dont let winners turn into losers. You never turn a profit until you sell it- dont worry if you sell and the stock price continues to rise. All lessons I have learned the hard way

[DC Mom]

I lost a huge amount in the stock market crash.  You have to lick your wounds, step back and learn from your mistakes.  A good book to read is William Oneil's How to Make it in Stocks.  Always have an exit strategy.  Lose your ego.  Dont get attached to a stock.  Cut your losses.  Minimize risks.  Dont let winners turn into losers.  You never turn a profit until you sell it- dont worry if you sell and the stock price continues to rise.  All lessons I have learned the hard way

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I just have lost all ability to tell when to sell and cut my losses. I used to. Now it seems that I hold when I should sell and sell when I should hold.

 

How did you get over it?

[Crap Throwing Monkey]

I started investing in individual stocks a few years ago. Initially I was successful, picking some early winners and gaining a fair bit of money.

 

Heartened by my early gains, I kept on putting in more money. Twice before I had big losses. Somehow I rebounded to the break even point or close to it those two times. The last time I was able to do it, I was close to thinking I needed money for a big expense coming up, but I thought I would be in better shape if I just took a quick stab at some quick gains at some companies down on their luck lately and that I could collect on a quick bounce.

 

Well I had some bad luck and one of my biggest investments went bankrupt over the course of a month.

 

Long story short, I kept on thinking things would pick up on some other ones but no matter what I touched, some bad news came out and the stock started tanking. Now, I am at a low point. I am lower than I have ever been before. Part of me is like I should just close up shop, liquidate everything, but it's very hard for me to do it.

 

I wonder if I would be throwing the baby out with the bath water and be selling too soon on some of these stocks. Also, knowing that there is no hope that things will turn around is crushing me. I worked so hard to save up all this money and now it's gone out of hubris.

 

There are a couple of key moments where I made stupid decisions... where I was about to pull out or hesitate on a risky move, but I made the wrong choice anyway.

 

I know it's lame to bring this up here on a Bills message board, but it's too hard to tell people close to me how stupid I was and the mistakes I made, esp. since I told them when it wasn't so bad earlier. I figure this cross-section of fans here might include some people who have been where I have been and might have some advice.

 

(What is left: EWJ, EVST, LU, F, GE)

 

It has taken over my life, obsessing over information, looking at whether I should trade or not. It's affecting my work quality and my social life.

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Given your screen name and the fact that I'm an active trader...I can't tell if you're serious or mocking me...

 

But assuming you're serious...what do you mean by "get over it"? Financially get over it? Emotionally? Financially...it depends on how much you lost, how much of what you lost you need, and what your responsibilities are (for example: I take smaller risks now that I'm married than I did when I was single. I take smaller risks with my IRA than I do with my "play money" - i.e. money I can afford to lose - in my trading account).

 

Emotionally...well, personally, I just accept the fact that it happens. Sometimes you ride the bull, sometimes the bull rides you. I've made $30k in a day before...and I've lost $10k in ninety seconds (yes, ninety seconds. No sh--. Established a position, the phone rang, I got up to answer it, and by the time I got back to the computer the position had caved in. That was pretty !@#$ed up.) And I think the bottom line is: if you can't sleep at night with those kinds of events running through your mind, trading probably isn't for you. Chalk it up to experience, and next time either develop a more philosophical and phlemegatic attitude towards it, or invest in some decent mutual funds.

[Pete]

I just have lost all ability to tell when to sell and cut my losses. I used to. Now it seems that I hold when I should sell and sell when I should hold.

 

How did you get over it?

489146[/snapback]

I still am a little scarred but time helps. I am a compulsive reader and I really buckled down and studied. I have lots of great stock book suggestions if you are interested. If I make a trade now I always cut my losses at 7%. I have a sell order if the stock price hits the 7% loss point. I never look back and move on to my next trade. Its all about preservation of capital. Check out Market Wizards by Jack Schwager. Great read that tells many of the top traders storys. Most of them lost everything they had in the beginning, regrouped and became market movers. Its a market- you will have good runs and bad runs. Learn from your mistakes and analyze what went wrong

[Crap Throwing Monkey]

I just have lost all ability to tell when to sell and cut my losses. I used to. Now it seems that I hold when I should sell and sell when I should hold.

 

How did you get over it?

489146[/snapback]

 

Single most important thing is to identify the fool in the market...and if you can't identify him, assume you're the fool. In other words, if you can't decide if the fools are selling...sell.

 

And I've never gone wrong selling a position. I've only gone wrong holding one. If there is any doubt, there is no doubt. Sell.

[DC Mom]

Given your screen name and the fact that I'm an active trader...I can't tell if you're serious or mocking me... 

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I was worried you might think I was mocking you. I actually am not. My screen name was half homage to begin with, anyway.

 

I appreciate your advice. Thanks.

 

I guess in the long run I want to pull out and just do the mutual fund thing, but on the other hand, I wonder when the time is to pull out. I have lost all perspective on that.

[KD in CA]

Buy some shares of Home Depot. dib and his friends will be making some big purchases there shortly. Should help Q4 #s.

[Crap Throwing Monkey]

I was worried you might think I was mocking you. I actually am not. My screen name was half homage to begin with, anyway.

 

I appreciate your advice. Thanks.

 

I guess in the long run I want to pull out and just do the mutual fund thing, but on the other hand, I wonder when the time is to pull out. I have lost all perspective on that.

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If you've lost perspective, it's time to pull out. Seriously. My biggest mistakes (holding Loral well into bankruptcy, for example - I've got a $20k investment that's worth, at today's close, seven dollars. Since the commission on the sale would be twelve, I'd actually have to pay five to close the position. ) have happened when I've lost perspective.

[HopsGuy]

Jesse Livermore is considered the greatest speculator ever. He went broke at least 3 times and eventually ate a gun in the men's room of a hotel bar.

 

You shouldn't be too hard on yourself.

 

IMHO, the people that are great traders are either lucky or a bit off. That is, they aren't normal in the sense that they don't get flustered by losing because they have some sort of chemical imbalance. I know two guys that are very successful (I'm in the business) and if you met them, you'd probably be a little creeped out after a few minutes. The things that make us human have been developed over millions of years of evolution (if you believe Darwin, which I do). Those things, specifically the fight/flight instinct are your enemies in trading. If you can overcome those deeply rooted instincts that are there to keep you alive, then you just might be able to make money trading. Otherwise, you'll need a lot of luck. That's my theory*, anyway.

 

 

*This applies to straight trading. If you're privy to inside information, then you can make a fortune illegally. I've seen this, too.

 

 

That having been said, read "Reminiscences of A Stock Operator" by Edwin Lefevre for the story about Livermore. It's the best book out there on trading. Ed Easterling's "Unexpected Returns" is a good one about the difference between absolute return vs. relative return.

 

John Hussman's Market Commentary is also very good.

 

Anyway, good luck.

[mead107]

get rid of that ge stock .

[bills_fan]

Its like gambling, a helluva lot of fun, but don't bet what you can't afford to lose. I mean that sincerely.

 

Look, I used to day-trade pre March 2000, when everyone did it and everyone made money. I made a bunch. I happened to be in a sell-off phase throughout most of 2nd half 2000, not due to my investing accumen but because I needed cash to pay for things in my personal life.

 

Then the crash happened and I realized that I'm not a trading professional and probably never will be. There's a reason some of these guys are paid millions, its not easy to do and very difficult to keep up with. If you are not spending 14-18 hours per day researching companies and stocks, forget it, because someone else is, and those in the business know that.

 

I re-focused on simply buying and holding a few very select companies with the money I had left. I have no regrets about that strategy. I'll tell you GE is one of them, as is Yahoo. I don't sell anymore and have become a proponent of buy-and-hold.

 

It really can be a legal form of gambling (day-trading, not investing) and you know the house never loses.

 

If I were you, I'd do one of two things...

 

1- Leave what you have in your account and don't look at it for a month. You'd be suprised at how your perspective changes.

 

2- Sell it all and close the account. If you don't have the discipline for 1, then do this.

 

There are more important things in life than your gambling on stocks, your job, social life, family etc.

[HopsGuy]

There's a reason some of these guys are paid millions, its not easy to do and very difficult to keep up with. 

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Here's a story about the guys that make millions. The numbers are outrageous, but rich folks will pay quite a bit for the few that can return 30-50%.

 

The problem is that day-traders think they can drop $50k in an acccount and live off of it. Stevie Cohen makes 50% and he's the best trader on the street, plus he makes quite a bit of it by having his guys bully the Investment Bankers for IPOs & info in exchange for order flow. He'll pay way more than the commission you pay if he thinks the broker can help him. Don't you think those guys will do anything to get that business?

 

So there you have it. Cohen makes an unbelievable 50% (and then takes half of the profits that his clients at SAC are more than happy to hand over) and the day trader thinks he can double that without the egde these guys have?

 

Most guys would have a better chance in a game of H.O.R.S.E. against Shaq.

[Pete]

My favorite trading books-

 

Steve Nisson- Japanese Candlestick Charting Techniques

Steve Nisson-Beyond Candlesticks

Alexander Elder-Trading For A Living

Alan Farley-The Master Swing Trader

Victor Sperandeo-Methods of a Wall Street Master

 

5 books I highly recomend for anyone before they consider making trades.

[Crap Throwing Monkey]

My favorite trading books-

 

Steve Nisson- Japanese Candlestick Charting Techniques

Steve Nisson-Beyond Candlesticks

Alexander Elder-Trading For A Living

Alan Farley-The Master Swing Trader

Victor Sperandeo-Methods of a Wall Street Master

 

5 books I highly recomend for anyone before they consider making trades.

493461[/snapback]

 

Sperandeo's an interesting and entertaining read in its own right, as well.

[Guffalo]

If you've lost perspective, it's time to pull out.  Seriously.  My biggest mistakes (holding Loral well into bankruptcy, for example - I've got a $20k investment that's worth, at today's close, seven dollars.    Since the commission on the sale would be twelve, I'd actually have to pay five to close the position.  ) have happened when I've lost perspective.

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My biggest fault is holding a position well after it has made it's move. Although I don't have a lot of capital in my trading portfolio, I always seem to hold a position that was a super performer, until it backs down to a moderate gain. On the down side, I have a knack for holding a position in hopes that it can't possibly go further down.

 

The only thing I have done successfully is to limit my exposure to allow that no one position can be more than a certain percentage of the cash value of the total holdings. By doing this even if I pick a coupla dogs, a decent one may keep me balanced. A good pick will be trimmed to approximately the starting value so the cash can be rolled over to a new pick or a position that I am happy with.

[Crap Throwing Monkey]

My biggest fault is holding a position well after it has made it's move. Although I don't have a lot of capital in my trading portfolio, I always seem to hold a position that was a super performer, until it backs down to a moderate gain. On the down side, I have a knack for holding a position in hopes that it can't possibly go further down.

 

The only thing I have done successfully is to limit my exposure to allow that no one position can be more than a certain percentage of the cash value of the total holdings. By doing this even if I pick a coupla dogs, a decent one may keep me balanced.  A good pick will be trimmed to approximately the starting value so the cash can be rolled over to a new pick or a position that I am happy with.

493634[/snapback]

 

No intent to sound condescending here...but that's a basic rookie mistake. I used to do that a lot. I finally learned that when I establish a position, I make sure I am very aware of my high and low sell points and don't violate them. Sometimes I miss out on really big profits (Forward Industries, for example, I bought around $3 with the specific goal of selling at $7. I ended up unloading it at $7...and the stock went to $28 in short order. Since I made about $15k, I'm not complaining). But then, sometimes I miss out on really big losses as well.

 

The other thing I do is make sure I can state clearly and concisely my reason for establishing a position. If I can't do it clearly or concisely (i.e. in 25 words or less - no kidding, I'll actually write down my reason and count the words), I don't buy. Airline stocks after 9/11, for example...my reasoning was "The government won't let the entire industry collapse, and Continental and Northwest are most likely to benefit from a government bailout." And I constantly review the reasoning to make sure it's still valid - if I buy a company based on an unusually low valuation in comparison to sales, and sales fall by 50%, then maybe that valuation is no longer unusually low and my reasoning is now faulty.

 

A little clarity in both cases (pricing points and reasoning) helps immeasurably, as it keeps you grounded in common sense keeps you from getting a Tom Clements-like attack of the clevers. And probably 80% or more of successfully investing is common sense.

[Spun]

Investing in stocks is always risky. One problem is how people get their info, i.e. friends, relatives, someone I met. Also, try not to invest / gamble based on emotion. Be patient and do your own research along with using a reputable advisor. Read and learn about technicals and fundamentals which can be dry and boring but very important. The business school basics of ROA, ROE and EPS can be very helpful. Diversify with some bluechips and consider long term and short term holdings. One thing that I have learned to do is holding on to cash and not buying any stocks at all. A mistake that I have made in the past is buying a stock because I had money available. The discipline of not buying and not needing to buy helps me make smarter decisions. Sometimes sitting on the sidelines can be beneficial as you may be able to identity an opportunity that you would not have been able to experience otherwise because you jumped too fast on what ended up being a dog.

 

Many investors have had their share of mistakes (including me). 401ks and Roth IRAs are alternatives. And depending on where you live, investing in real estate will continue to be wise. If you are minimizing debt and saving cash, don't kick yourself for missed opportunities. If you sell a stock for profit that later appreciates, you made money! You have worked hard for your money, baby it.

 

I hope this helps!

[DC Mom]

I have begun paring down my holdings and better diversifying in order to look more to long term investing than I have been. Unfortunately, I wish my timing had been a little different. I sold EVST a day before it practically doubled in value.

 

C'est la vie.

[Pete]

I have begun paring down my holdings and better diversifying in order to look more to long term investing than I have been. Unfortunately, I wish my timing had been a little different. I sold EVST a day before it practically doubled in value.

 

C'est la vie.

495147[/snapback]

You can take a break from the market and invest in Mutual Funds. The Acorn Fund and the American Funds have done very well for me the past 10 years