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Getting Back into a Stock

2010-05-01 02:58
Getting back into a stock is something that you must be able to do when trading. Some people will refuse to re-enter a stock after they have just had a bad experience with it.

But if it gives you a trade signals you must re-enter. Let’s say I buy a stock only to see it come down and hit my stop. I end up losing only 2% on the trade because I have cut my losses short. It doesn’t feel good but it is not enough to hurt me too bad. Then a couple days later it gives me a sell signal. I short it and end up making 10% as the stock plummets. This scenario isn’t all that uncommon. In fact it happens all the time. If I had been too scared to pull the trigger and re-enter the stock because of the past I would have missed the big 10% gain.

You have to accept that every stock will give you a false signal from time to time. You also have to realize that all stocks can give you big profits. If you refuse to re-enter a stock after a bad trade you are losing a potential to make money.

Of course you also have to realize that all stocks have different personalities. As such some stocks may work very well for your trading approach and others may not work as well. If one stock is just giving you consistent losses time and time again, you may want hold off on trading it. If fact you could even put that stock on the do not trade list.

In short re-entering can be very profitable. Getting the bad end on one stock trade isn’t enough to stop trading the stock, or stop trading altogether. If you are consistently losing money on a stock it can benefit you to step back and take a look at why that is. If it is because the stock is too volatile stop trading it.

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