(MP) The critics would say that stock markets has always been nothing more than a gamble. They are, of course, wrong! But the truth remains that, like in gambling, you can take a loss on stock too, even if you’ve pulled all the right moves. The price of defeat is usually paid with devastating emotions and a growing debt threatening to crush you if don’t get rid of it soon. Such situations, no matter how unpleasant they may be, shouldn’t be a cause of despair. On the contrary, you should keep your head cool, and do your best to find the way out of this maze. Let’s see how that can be done.
If You Take a Loss on Stock
Losing money doesn’t mean that you should abandon the stock market completely. The worst thing you can do after taking loss on stocks is to heedlessly rush into another one. For now, you will need a short break from new investments to get a clear picture what went wrong. Don’t push anything under the rug. Once you’ve taken ownership — you’ve taken responsibility for your loss, so do your best to assess how large your role was exactly. If you find out, for example, that you took more risk than you should have, that is a valuable lesson for the future.
Get Rid of the Debt
Once you are sure that you have understood and learned the lesson, it is time to find your way out of the situation in which you have brought yourself. Start by relieving yourself from debt. Essentially, you will, have to spend less money than you are earning. Lose all the unnecessary items and properties that are costing you money. And do your best to set up more income flow. Don’t underestimate the severity of this situation. If you have a problem finding the solution, hiring professionals experienced with debt recovery is much better investment than paying endless interests.
Evaluate Your Options
Your current situation may be grim, but when the short-term goals fail you, it is time to resort to the long-term ones. Having a well-thought out, thorough strategy with a set of goals and clear rules for buying will help you immensely. This written strategy can be based on technical, fundamental or quantitative factors and include key market actions (price activity, volume levels, changes in momentum, etc.). If you have one, you are less likely to suffer a crushing defeat again.
Find a Reason to Sell a Stock
Investors usually tend to have a very elaborate set of rules about buying stocks, but only few of them have clear boundaries for when to sell. It should be obvious that this is a great mistake. If you want to keep yourself afloat, you will need a clear set of triggers that will prompt you to sell the stocks without too much delay. They can be anything ranging from bad corporate news to plummeting prices, but when you notice that stocks are losing their position, that should be clear enough signal to take action.
Diversify Future Investments
Every experienced investor knows that while some investments are going down, others are going up, thus balancing each other out. Although there may come days when it seems that everything is going down, there will come days where everything is going to go up. By diversifying investments, as much as possible, investors are lessening the stress level, and limiting a potential loss on stock. Such foundations provide much safer trading environment, mitigate the consequences of impulse buying, and allow investors to better assess investment opportunities.
Worst thing you can do after suffering a major stock market loss is to lose confidence and retreat. After all, you have lost the battle, but war is far from over. Take a moment to regroup your forces, use all the tips we gave you, and we are sure you will come out as a winner.