It happens to everyone at some time or other. We enter into a trade and are confident of success and then the trade turns around and does the opposite of what we were confident it was going to do.
As the stock continues to fall, we lose our confidence and nerve and sell out taking a loss. Often the trade turns around, sometimes in the same day, and ends up higher than where we got out. We took a loss when it could have been a gain.
This is a common complaint among investors. It ranks right up there with how to pick the right stocks for investing, to knowing when to sell a winning trade. We all know about a stop-loss and many of us use them, but often when a stock begins a decline we adjust our stop-loss a bit lower hoping to avoid a shakeout on the trade.
Shake outs are a normal part of stock and option trading. Recently I received a number of emails from investors, following a trade in Intel Stock where many were shaken out of what had been a promising trade. These investors asked me if I had any tips to help them avoid shake outs.
These are my 5 best tips which any investor can follow to help combat being shaken out of stock and option trades.