Can’t go lower – these are the three deadly words too many traders mutter to themselves…
“The stock can’t go any lower than this…right? It must bounce.”
It will, eventually. But I tell you, your account most likely will also eventually see $0.00 if you follow this stubborn path.
Those three words have been the demise of too many traders and have probably blow many accounts as well.
So why do you think traders are so stubborn when it comes to cutting losses?
Like most aspects of trading, it comes down to psychology. A traders personality, plays a vital role in their overall success in this business. The more rigid and less adaptive your personality is, the more difficult it is for your to admit being wrong.
Unfortunately as a trader, being wrong is just the price of doing business.
Think of being wrong as a tax, there’s just no getting around it.
“Can’t Go Lower”… even the strongest support you can find on a chart gets penetrated. When a stock sells off, you need to ask yourself who’s unloading? The size of the ship will dictate the ‘wake’.
Doesn’t matter how strong support is, if a whale wants out, good luck with your support. Once he’s flat, price most likely will resume levels from bottom feeders.
That being said, there’s no need to jump in front of a selloff. Your opinion of a selloff being over is completely irrelevant.
If you want to short, find an entry, pull the trigger and ride it out. If you want to buy, just wait.
Avoid being stubborn, the market has a “nice” way of proving you wrong!
