Do you love a stock?
Being emotionally tied to a stock means that you love a stock. Love is just 1 of the 9 major emotions in trading. Click the link below to find out more about other emotions.
Emotional attachment or love in trading will prevent you from making the correct decisions to make money and preserve your capital. It clouds your judgement, and do not allow you to view market information objectively. It causes you not to buy and sell at the right times.
Traders who love the stocks they own often turn into bag holders, as their emotions prevent them from respecting price action.
When you love a stock, you're always bullish on it. You expect its stock price to keep rising. You can't stand any criticism or negative news on it. You feel the need to respond by glorifying the stock and attacking the stock's rivals by posting negative comments.
The last thing to fall in love with is a stock. It is just a sheet of paper indicating a part ownership in a company. You buy and sell a stock to make profit, not hold forever. Don't fall in love with the CEO either.
Maybe you made money from the stock in the past during the bull market and can't bear to let go when making losses. Remember past performance does not equal future performance. You might be reluctant to sell it for a loss for fear of admitting you were wrong. You can't stand any negative comments on the stock and always hope that the price rises. You are not facing reality. The price rises and falls all the time on good and bad news.
Be self-critical and open to bad news and comments. Have a trading plan when trading. DYODD on the stock you are interested in. If it has good fundamentals, then use TA to determine your buying and selling prices. In case something goes wrong, be disciplined in cutting loss when it falls 10% below your buying price. Sell a stock when the fundamentals take a turn for the worse.
A stock goes from being over-pessimistic to being over-optimistic and vice versa. Buy and sell accordingly. A stock can't rise and fall forever in price. The higher a stock climbs, the harder it falls no matter how good the fundamentals are. Always book your profits at the appropriate times.
A trader will be successful if he doesn't love a stock and is able to control his emotions.
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Momentum Trader : Well said. I cut loss at even smaller %
bullrider_21 OP Momentum Trader : I see lots of Tesla bulls loving the stock.
TeslaSmurf : True, but study, practice and experience allow you to treat your beloved stock with the necessary cool blood. My solution was to buy new stocks only at 50 discount (using the profits from day-trading as 50% discount to buy new stocks) and at very relevant dips (1-3 per year). My rule also says to sell 1/3 of the portfolio in three different times (1/9+ 1/9 + 1/9) at around new highs in the quarter, so to have more fresh cash to buy the following dips.
101895607 bullrider_21 OP : Tesla fell yesterday