Seller’s remorse is that sinking feeling you when you impulsively push the sell order and immediately think you made a mistake. The feelings of remorse and regret intensify as you watch while the stock climbs higher and higher.
It happens to everyone at least once in a while. For many, however, it happens all the time, and it is costly. It shakes your confidence and lightens your returns. Even if you sold for a profit, the feeling is the same. The stock goes on a terrific run, and you are not in it. Maybe you got scared and sold too soon, thinking, well, if I’m wrong, I can always buy back in. But you never do. Instead, you watch it go up and up and think about all the money you could have made.
Does that sound like you? The trouble is, you need a few big winners to make up for your losers, and you will never get them if you are always selling too soon.
There are at least a couple of things you can do to avoid seller’s remorse from happening to you, at least not quite so often.
First, you can change your mindset. At Friday’s Financial Freedom Summit, Dr. David Paul stated, and I am paraphrasing, unsuccessful traders are pessimistic about their winners because they are afraid of holding on too long and giving back too much. And they are optimistic about their losers, convincing themselves that they weren’t wrong about the stock and Price will come back. Successful traders and investors, he said, have the opposite mindset. They are optimistic about their winning trades and pessimistic about their losers.
Changing your mindset will help, but the best way to avoid seller’s remorse is to make sure you have a strict set of sell rules as part of your trading plan. Sell rules may include your initial Stop, trailing stops, moving average crossovers, and price targets. Since you have VectorVest, you might use market timing to tighten your sell rules in falling broad markets.
Most traders have a checklist of criteria that must be met before they buy. That’s good. But VectorVest teaches that it is even more important to have your sell rules clearly established before you push the Buy Order.
Here is another concept that may help you avoid seller’s remorse. Make sure your sell criteria are met before you exit the trade! You would be surprised how many people panic and sell before their tried and tested sell rules are met. If you sell a position without being triggered to sell by your criteria, then watching that stock continue to run up should cause you some pain. On the other hand, if you sold because your rules told you to sell, you can count your trade as a win.
At VectorVest, we know from listening to attendees at our workshops and webinars that selling is by far the most challenging aspect of trading for most individuals. It is a delicate balance between knowing when to take a small loss before it becomes a big loss, when to take profits, and when to remain optimistic and let your winners run.
If you are having difficulty with selling and it’s costing you money and getting you frustrated, you might want to check out a new course that we have creatively titled, WHEN TO SELL. Dr. David Paul, Steve Chappell, Jerry D’Ambrosio and I have collaborated on this brand-new course to teach you the best techniques we have learned over the years for knowing When to Sell.
To learn more, please go to www.vectorvest.com/sell for all the details. I am sure we can help you discover those times when you must sell, and other situations when selling too soon will simply leave you with SELLER’S REMORSE.