Looking for Post Crash Peak DAX 30, Euro Stoxx 50 Outlook? Here’s a look at a possible scenario for the S&P 500 next week, November 22-25. Any advice from this article is purely speculative and should be used for informational purposes only.
I got a great take a poll from one of my clients recently. He has had a major dip in his share price and is unsure how to get it back up. His instinct is to sell everything and let go of the stock that will give him the best return on his investment. While this might work in the short term, it would not be in his long term interest to do so.
In fact, he would most likely do well to hold onto the stock and wait until his investment gains back a little bit. Why? It would be because he knows that if the stock rises a bit more before plunging further, he will have at least an extra 20% return on his investment.
What is even better is that he is taking advantage of a free-falling stock. There is no reason for him to sell out of panic.
Well, what about that other stock going down even faster? What if the other stock went down even faster than his own stock? How long would he have to wait before trading out of panic?
I believe it would take a lot longer to sell out of panic about a stock that is not dropping as fast as his stock. That’s why I believe it is better to hold off until the stock starts to rebound. One reason is that there will be a lot more selling pressure on your stock. Once the news gets out, that market will definitely plummet.
Another reason is that the current market behavior is more like what happens during a recession. In the recession, people would sell out of fear much more quickly, because they think that the economy is going to plunge even more.
That makes sense, as the business is terrible. But in this market, the numbers are not good. So you want to sell out of fear rather than panic.
So, what is the best way to trade your stock? Buy the stock that looks more likely to rebound and watch it continue to soar on its own. And, because of the added profits that will come from holding the stock until it rises, that is exactly what you should do.
If you are holding the stock out of fear, the market will just continue to fall on its own, right? It’s a downward spiral.
The main difference in the two scenarios is how fast the stock drops, as it would take some time for your stock to recover if you buy the one that would fall more quickly. A Schwab Poll also helps to answer the question of what would be the best time to trade out of panic about a stock.
You need to set up a stop loss and watch that stock climb. This is the key to using momentum as an investing tool. If you use momentum correctly, you can hold off on selling until the stock recovers.