I received an email from Lim who is in a dilemma.
He went long in a particular stock and prices have been falling.
He thought that since the price has fallen, it’s cheaper and he should buy more.
So he averaged in a few more lots.
…he’s sitting on a paper loss of 35%.
So what should he do?
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Cut the loss, or hold onto the stock?
My answer is this:
Whether you’re a trader or investor, you have to know the point where you’re wrong, and get out of your position.
Because if you don’t, you will always be at the mercy of the markets, which is the last thing you want.
If it were me, I would cut the loss and take this as a valuable lesson.
It’s a bitter pill to swallow, but it’s the only way forward.
Now back to the markets…
In this week’s market analysis, I will show a few potential trading setups on gold, NZD/USD and crude oil.