Have you ever made a cut loss, the stock price actually went up straight back? Even straight back up beyond your take profit limit? Or have you ever cut loss, the stock price dropped a few points, but then it went back up beyond your cut loss limit? What do you think is the cause?
If you ask the cause, it can vary. A very possible cause is that you incorrectly set the cut loss limit (wrongly determined the crucial support point). But there is one more reason, namely many traders who like to rush to cut losses. This is the reason why when cut loss, the stock price actually rises immediately.
How to do the right cut loss, Bung Heze? Didn't Bung Heze always say that cut loss should be done as early as possible? Ask you
The principle of cut loss must be done as early and as quickly as possible. But don't misinterpret the meaning of "early" and "as soon as possible" as "rushing to cut loss". If you rush to cut loss, the results will be inversely proportional to what you expect. You can be stressed, cut loss trauma, paranoid
Very often, experts, stock analysts and traders talk on stock forums recommend that you: Immediately cut loss when the stock price drops and take it again at the lower price. To me, such a suggestion is "less responsible". Because, many of them do not specifically recommend how to do the right cut loss, and how to take stock prices at lower prices according to the right capital allocation.
Even stocks that have fallen by 5% don't necessarily mean you have to cut losses right away. If it turns out that the stock can reverse direction quickly, you will regret it. Or, if you cut loss and take it again at the lower price, then after you take profit, the difference between take profit - cut loss, your position is still a loss, then your decision is to cut loss after the stock drops 5% and take it at the bottom price (then take profit) ), is the wrong decision.
Cut loss is also part of a trading plan that you must prepare. Do not let because of the cut loss recommendations, you will actually suffer an even bigger loss. The right cut loss must consider 3 main things, namely:
- JCI / market conditions
- Stock technical condition
- Fundamental conditions and company track record
You can't miss a single one of these points. Then, how is the practice?
The right cut loss strategy, if I describe it in this post, will be very long. One day I will update my trading book and learn how to do the right cut loss (please be patient).
Well, if you have read the entire contents of this post, at least you have learned a valuable lesson: Don't be in a hurry to make a cut loss, as long as the stock you hold according to the 3 point assessment above is very likely for a short-term rebound, you can hold it.
