What to do when you make an unwise investment decision
Many of us know that one of the greatest mistakes an investor/trader can make is risking too much capital in any one trade/investment. However, what should you do when it all goes wrong? When you have risked it all…and lost. What should you do if this is what you have done? The impact of allowing a trade to turn into an investment can be utterly devastating. Crypto currencies have seen some signifiant falls recently, but there is always something to get excited about as an investor/trader. The impact of getting it wrong can be severe. Here is an extract taken from just one person. This was from the GameStop option saga earlier in the year:
“Barring deaths in the family, this has been the most devastating two weeks of my life,” says Will Brown, a 30-year-old North Carolina fish farmer. He tried to reverse a $20,000 loss trading other stocks by plunking down his remaining capital—a few thousand dollars—in GameStop options. At one point, he calculates he had a position worth $300,000 or so, a sum almost entirely evaporated. “I’m coming to terms with the fact that I have nobody to blame for this but myself.”
You can rebuild
What many people don’t tell you is that you can start again. You may be just left with the words, ‘told you so ringing in your ears’. You may think your are starting from nothing. However, you are not. You are starting with the knowledge that you should never let a trade turn into an investment as I wrote on Feb 03. That is, in itself, valuable. It is also a lesson that many, many traders have learnt before you. Including some great and very successful ones. No-one likes talking about losses, but all traders deal with uncomfortable losing trades and runs. Some hugely successful traders have also ‘lost it all’ in their trading past. You can rebuild and start again. Hopefully, far wiser in managing risk. If you would like help with your risk management it is a concept I teach daily here.