One trick of the day: how we should operate against losses (crocodile rule)

One trick of the day: how we should handle the loss
2015-01-23 11:00:07

What do you do if your investment account loses money? Generally speaking there are three kinds of attitude: 1, do ostrich, ignore, let its nature. 2, low-position replenishment, diluted costs. 3. Admit the mistake and cut the meat off the field.

The first kind of attitude is very common, but ostrich policy often can't wait for miracles to happen, unless another round, a big bull market will come to salvation.

The second is also a practice that many investors are passionate about. The drawbacks of this way of operation is also very obvious, first you can not determine how low the cost of your low price, especially the bear market does not say the bottom, resulting in more buy more sets, the more deep. Second, unwilling to change positions, choose to continue to add to the fund, especially the deep set of funds, give up the opportunity to replace the excellent fund, which is equivalent to the inferior currency expulsion of good money, the result is that you have a basket of rotten funds.

The third attitude, admit wrong, decisive departure, often proved to be correct, but only a small number of people can overcome the avoidance of human nature and the psychology of luck. It is said that the world's greatest trader has a principle known as the "Crocodile rule", to become a successful trader, must be repeatedly trained to understand the principle of the degree. Why is it called the law of the crocodile? If a crocodile bites your feet and you try to struggle, the result is that the more you struggle, the deeper you become. In this case, the only way to save your life is to sacrifice one foot. Use this rule in the market, that is, if mistakes lead to losses, and losses are still widening, exceeding your expectations, then perhaps you should leave the field as soon as possible, not to try to fill the position, Gatzanlai amortization low cost.

One trick of the day: how we should operate against losses (crocodile rule)