7
Learn How to Limit Losses
It’s true that not everyone believes in selling stocks, especially buy-and-hold investors. Unfortunately, one of the most common ways to lose money is by not getting out of a stock in time. Speaking from experience, failure to cut losses on a losing stock is a sure way to lose a fortune—and your self-confidence.
As you have learned, before you buy a stock, you should have a written plan with two prices.
1. Your buy price.
2. Your planned selling price.
Finally, the plan includes a third price, an emergency escape price that limits losses. Typically, the escape price is 5 percent or more below your entry price. Note: Some people will use a 7 or 8 percent escape price, but you can establish your own loss limit. ...
Get Understanding Stocks 2E, 2nd Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
