When to Cut Stock Losses
This new video I just posted is REQUIRED watching, and we transcribed it too for my valued deafstudents because it’s THAT important:
So a lot of people ask me, “What does it mean to cut stock losses? “And how do you know when to exit a trade?” So, I live and die by rule number one, cut stock losses quickly.
…he’s a little more aggressive. He doesn’t always cut his losses quickly. He prefers to cut his losses intelligently. For me, I like to exit trades when they start going against me because I have so much experience because I know these patterns inside and out. If a stock doesn’t do what I think, I’m out, sometimes even for small gains. If I’m buying a stock for a morning spike, let’s say it’s a crypto stock, and they just announced some new crypto company, and theoretically, they should be spiking right away because that’s the hottest pattern right now. Guess what. If it doesn’t spike or if it stops spiking, and it’s already up 20% and I’m buying it, I’m out. I don’t care if I make five cents or lose five cents per share.**
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I don’t care if I make a hundred or lose 200. It’s not doing what I want. So I go in with very specific goals for every trade. If I’m shorting a stock, let’s say, and it’s the first red day, and I’m expecting a morning panic the next day, and there is no panic, and let’s say the company has issued a press release overnight to try to pump themselves up and kind of squeeze shorts, and the stock, it starts going up, I’m out. I cut losses. For me, it’s not just about the gain or the loss. It’s about the pattern and the circumstance. And it’s only because I know the patterns inside and out that I can do this. And that’s why I always tell you, study hard, recognize all these patterns, learn from my now 5,000 plus video lessons. You can become an expert at these patterns just like I am. And once you become an expert, you don’t have to wait for a trade to become a loss to exit it. You can actually take small gains or medium-sized gains, and you’ll know that you want to get out because the pattern is not working out. For me, I want to give stocks as long as they can, but at the same time, if the stock is not doing what I want, I cut it, and this way I’m very controlled.**
I don’t let a small mistake turn into a big disaster. Some of these crypto stocks are spiking 200, 500, even a thousand percent in a day. And then, the past week or so, some crypto stocks haven’t budged. So, it’s not an exact science. You can’t just be aggressive on every stock. You can also modulate your position size. If you have five wins in a row on one pattern and then the pattern appears again, you might say, “Huh, this pattern is working really well right now. “Why don’t I take a 50% extra bigger position this time? “Or even double up on my position?” Or maybe you’re buying an earnings winner, which in years past have been fantastic, but now after roughly a decade-long bull market, the earnings winners aren’t doing as well, maybe you can buy the earnings winner but take a half-size position because it’s not really working out that much right now. And be more conservative. You can adjust your position size. You can adjust how aggressive or conservative you are on every trade. This is not just like going to the casino, where you’re betting on black or red, and you double your money or lose all your money. You can modulate.
This is a very good example of just my site’s sliding scale. If you’ve seen my trader checklist guide, I’ll post a link just below this video also. This is a guide where I talked about the site-sliding scale. And sometimes a stock might be doing exactly what you want, and you’re very happy with it, but then let’s say you have a meeting. I have several students who are working full time, or you have a class. Some students are at university or in college, and they have a class. So, you might have to take profits just because of your own personal schedule. I’ve thought about that. I’ve included that in the site-sliding scale. Maybe, guess what, you want to give the stock more time but you’re gonna be busy for the next hour, so you can sell half your position. You don’t have to exit your whole position right away. There are so many different ways to slice and dice your position and how aggressive and conservative you wanna be. You choose. You just have to understand that you have these options, that the stock market is a little complex.
Even if a pattern has been working five times in a row, maybe the pattern won’t work the sixth time, and you’ll have to accept that. Too many people, I think, get in the habit of saying, “Oh, this has been working so well. “The next time is guaranteed.” Listen, no trade is guaranteed. You can lose money on any single trade. And you have to be willing to cut losses. You have to be willing to exit. You have to be willing to adapt to the market. The market is always right. And if you want to ignore me, that’s fine. If you want to fight me, if you want to fight the market, guess what. The market will teach you. The market will humble you and bring your ego and your account down to size. So, for me, it’s all about adapting to what’s working. Sometimes I’m more aggressive. Sometimes I’m more conservative. If I have a busy travel schedule, just no matter how hot the market is, I might take smaller positions, if I’m not on great wifi. You see this in some of the alerts that I give because I say, “Look, I’m not trading with a full position “just because of my situation, where I am in the world.” I travel a lot. Sometimes I’m in third-world countries. I don’t wanna risk something crazy happening if my wifi goes down. I’ve done that in the past. I’ve learned from that. So, you tell me.
Leave a comment underneath this video saying you wanna be aggressive or conservative. You have two choices, and there doesn’t have to be one answer. You can say sometimes I’ll be aggressive, sometimes I’ll be conservative. Maybe all the time you’ll be conservative. Maybe you’re a gun-slinger and you wanna blow up and you wanna ignore my rules and you wanna say, “Hey, I’m gonna be aggressive all the time.” You get to choose. You’re in control. Let me know what you wanna do.