You know the signs are pointing down, yet you can't find it in yourself to sell your favorite stock. What do you do?
Many traders can argue that the hardest part about investing in the stock market isn't buying the stock, it is selling the stock. When you get emotionally attached to a position, the longer you hold it the harder it will be to let go of it. To combat this and "let go", follow these simple steps:
- Separate Yourself From the Position. Imagine the stock as any random company with ticker xyz or cba, it doesn't matter. You need to get the attachment out of your head that this stock is "special" and unique.
- Take a Good Hard Look at the Facts. Ask yourself, "knowing what I know now, would I still buy this stock today?" Overview the fundamentals and technicals again, since you have separated yourself emotionally, you will now see things a bit clearer.
- Acknowledge the Worst. You need to mentally acknowledge the fact that this stock is no longer a stock you should hold, and it needs to be removed from your portfolio.
- Sell The Stock Immediately. As soon as you understand what needs to be done, do it! Don't sit around and wait because your mind will try and reverse your thinking. Hesitation is for the weak, but you are strong.
- Drink a Cold One and Reflect. Now that you've done the unthinkable and sold your once "favorite" stock, reward yourself with a beer, lemonade, glass of water, whatever. Think about what you did and how it will benefit you in the long haul, be proud of yourself for staying disciplined.
- Find the Next Big Winner. With your freed up cash and freed up mind, start your search for the next big winner.