Originally published by Chamber of Merchants
Cutting Bad Losses vs Drawdown
There is a difference between a pullback and a trade that has soured.
I exited Excelsior Gold Ltd (AX:EXG) today due to the news they released.
Now you might ask me, “Why don’t you wait for the bounce?” or “Isn’t that panic selling?”
No. Being a Merchant means I have the privilege of transacting in share that gives me peace at night. When the news was released it changed the original thesis of my transaction.
You see, many traders enter a transaction based on a story or a hunch.
Few traders are prepared to exit the share if the hunch or story changes for the worse: rather they hold onto hope.
Hope doesn’t change the market. Hope doesn’t change how other people respond to a situation with regard to finances.
So my loss is roughly $4k AUD. But I now have cash to enter a winning transaction. My loss is secured and I can move on to the next one.
Freeing yourself from a bad situation is key. I can handle drawdowns. Heck, I tweeted my -$32k just a few days ago. But that is a drawdown.
Losses on the other hand, should always be minimised.
Looking forward to turning the $10K AUD cash into a good transaction.