Beyond the game of investment, losing is central to life’s journey. Sometimes, we win; other times, we lose. Investment in stocks bears its challenges and not-so-fruitful days. There isn’t anyone who deliberately buys stock knowing it’ll go down the drain. However, how do you keep your head above water and cut the loss? Although no one plans to suffer losses in the stock market, we discuss some strategies on how to deal with them.
9 Effective steps to deal with losses in the stock market
Here are 9 ways you can cope with losses in the stock market:
1. Accept responsibility for the loss
Hold yourself accountable for making the loss; own it. Don’t hide from it or blame another thing entirely for the loss. Basically, accepting responsibility for your loss will help you get better at trading.
2. Take a break from trading
Halt your trading activities and figure out how you made the loss. Evaluate your performance by assessing what went wrong and reviewing all your e events carefully. Also, think about what must have made you lose. Ask yourself and answer questions like “did the trade have a solid plan?”, “was the trade too risky?”
3. Draft a plan
Make a clear and detailed plan to guide your future trades. The activities of your plan should be different from what you have done in the past. Additionally, your plan should include trading activities that you will no longer engage in (e.g trading in risky situations).
4. Don’t allow your losses to define you
No matter how big your loss is, don’t let it define you. You can achieve far better than whatever you lost. Ensure that you get over the loss and get back to the stock market.
5. Be motivated
Use your experience from the loss as a motivation to learn and develop your trading skills. Use your weakness to equip yourself to be better ready for future trading
6. Review and Reflect on Your Choices
Here, what we do is learn from our investment mistakes: What did we do wrong? What could we have done differently? We try to connect the pieces of the puzzle together and prepare ourselves for even better chances in the future.
7. Unlearn, Learn and Relearn Best Practices
Some investors often have the wrong assumptions when investing in stocks. For instance, there is the misconception that stocks always rebound. Since there is a tendency for stocks to go higher, investors operate under the illusion that their losses in the stock market will eventually bounce back. It is noteworthy to mention that stock trading is an index of winners.
For some other investors, they dogmatically hold on to a losing stock until they get value for its purchase price. Following through with this only complicates things and doesn’t prevent the stocks from sliding. Investors should learn to manage these epileptic beliefs and work on accommodating what actually works in stock trading.
8. Revisit Your Investment Strategy
This is the blueprint of your investment game. Once it goes wrong, everything else falls apart. Your investment strategy should contain rules for buying and selling stocks. Does it align with the SMART principle? Should you include quantitative factors in your strategy? All these questions and more help put your strategy in check. You do not want to continue losing consecutively, so you’ve got to make it right. Ask yourself whether you need to consult professionals in stock trading and gain insights from their practice.
9. Tighten Your Belt and Shoot For The Moon
Losses should not define us. As investors, we shouldn’t beat ourselves to it by taking it personally. Remember, there are investors out there who have worse cases. Like we mentioned earlier, taking corrective action is a good strategy to employ. When we are certain that “all is in order”, we may decide to shoot for the moon [and land among the stars].
In investing, avoiding losses is not always possible, especially with the coming pandemic. What successful investors do is to accept this and try to minimize their losses, manage their stocks during the pandemic, rather than avoid them. Losses hurt.
However, we can mitigate the sting with the right mindset and a willingness to learn from the situation.
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