Waiting For The Comeback

"It's going to come back"..

I think this has to be the sentence offered up by most traders who have a big losing position.

Funny how they say "It's going to go back" instead of "Crap - it may go lower - best get out."

In fact the sentence was one said directly to me by someone who had bought a share. He'd bought it at 1200p then he'd bought more and 800p.

"I've just bought some more at 400," he said to me very confidently.

"It's going to come back." he added.

"It might go down some more," I suggested. "Shouldn't you have set a stop loss with each trade - then you wouldn't have lost so much money."

He got annoyed. "I haven't lost anything," he said. "I only lose if I sell. But I won't. This is a great company, it's just been caught out by the oversold market."

"How much have you got in it now?" I asked.

"About 20 grand," he said. "It'll go back up to 1200p and I'll have made a fortune!"

There was no point me arguing the fact it was down so much already said something was badly wrong. And worse every time he opened his broking account he had to stare at a massive loser ever time.

Or that he made the classic mistake of letting a losing position run away.

I always cut anything that's gone over the 15% loss level. The thing is you can always buy back lower.

But it is amazing the number of shares that go down 15% that just carry on going down. And if you carry on holding them, you're risking some serious damage.

In fact I've met people who STILL have a 70% loser and have had it for YEARS.

They can't bear to sell it. I suspect they will never sell it.

If you sell your losers you're more likely to win - really. And if you find it impossible to sell losers you ought to decide whether you ought to be trading shares at all..

Oh, I ought to end by telling you what the company was my acquaintance had bought.

Northern Rock.