How to Best Deal with Your Losses

by Andrew McGuinness     ago. 16, 2019

The first rule in Trading101 is to learn how to accept both gains and losses. As a trader, you’re obviously in the business to focus on the profits you may gain, your biggest aim to detect potential that leads to high returns in the future. However, it is necessary to take into account the possible losses that may come with these possibly successful stocks.

Even if you assume that a trade is not incredibly risky due to the fact trends and market patterns say otherwise, there is some extent of risk involved with every investment. Losses should be anticipated just as much as gains. However, losses may lead to overreacting and putting yourself into a worse position than you started with simply out of fear. Losses should not be feared, but rather prepared for, with remedies for loss readied as well. The following are a couple of ways to prepare for losses and what steps to take if they do happen to come.

1. Is this temporary?

When first experiencing a substantial loss, you might think it is best to sell your shares and move on to better things on the market. However, before one dip in the market pushes you to make such drastic decisions, ask yourself one question: is this permanent or temporary? One dip may show signs of larger losses to come, but it is just as likely to lead to high returns.

You never know what the future of an investment may hold. For this reason, consider your circumstances. Would you be capable of sustaining the blow to your capital that a loss with this investment would cause? If so, stick with your investment and wait for more telling signs of what’s to come. A single dip may be a big scare at first, but it is nowhere near substantial enough to predict the future potential of a share.

2. Stay involved

If you’ve made an investment that appears to continue growing at a steady rate, it is easy to maintain your interest and keep track of what is occurring with your investment. However, other investments that may seem to be losing stamina are likely to lose an investor’s interest quickly. In order to become a successful investor, it is essential to stay updated on the status of all your investments, no matter how dull they may have become.

Every investment needs its fair share of tender love and care in order to provide what you are looking for. If you carefully investigate investments that have gone dull by analysing patterns over time, the company’s rank among other companies like it within the market, and other criteria that may show where it went wrong, you are able wisely consider whether this investment is even worth your tender love and care.

3. Know when to admit an investment is hopeless

Every investment you hold is within your portfolio because, at some point, you saw a glimmer of hope in its future. In fact, every investment you hold should currently display glimmers of hope, otherwise you wouldn’t still have them.

The problem is, sometimes these glimmers are faulty. Sometimes, investments are sincerely hopeless no matter how long you are pushing for them and maintain that ounce of hope. Traders need to realize when an investment is no longer showing signs of hope and drop these investments immediately without looking back.

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