"Most new traders focus on making money. All good,
experienced, profitable traders focus on not losing money and just
letting the gains materialize. Defense first…
Move on. The act of taking your loss often frees
the trader to make another good trade. When they are still in this
losing position they are paralyzed… They are consumed
with this loss and unable to place a new, good trade. But when you hit
the bids and just accept your loss, a burden is lifted from your
shoulders and you can go back to work."
Remember my four rules that should be followed in this sequence:
- Don't go broke
- Make money
- Build wealth
- Never, never forget rule #1
Then there's this more upbeat piece from Felix Salmon:
"But there is a tiny bit of good news: for the first time in many years
I'm finally beginning to think that stocks aren't overpriced any more.
(Although they're still overpriced in relation to the credit market,
which is priced for Armageddon.) As Dean Baker points out, a low stock
market is a gift to young workers.
If we're saddling them with hundreds of billions of dollars in new
liabilities, maybe it's just as well we're gifting them $10 trillion in
upside [potential] on equities at the same time."
What's behind the market debacle? Don Fishback, quoting Larry McMillan:
"The selling has reached historic proportions. There literally is a
“run on the market,” as investors worldwide are dumping stocks. It
seems that the major catalyst for this selling is the fact that the
newest large banks primarily J. P. Morgan, Goldman Sachs, and possibly
Morgan Stanley as well — have issued massive margin calls to hedge
funds and other professional traders… These calls were not issued because of market losses, but
more because the banks arbitrarily decided that they wanted their
customers to use less leverage. Margin rates as low as 15% for broker
dealers were raised to 35%; hedge funds who had been used to operating
on high leverage were told that they had to bring accounts up to a much
larger percentage of equity. In this illiquid environment, where all
manor of exotic securities literally have no bids, the only place to
raise the cash to meet margin calls was to sell stock. That is what
really set this market over the edge."
Have covered call positions? Tempted to sell extra calls , assuming your broker allows it (many don't)? Here's excellent advice from Adam at Daily Options Report:
"What is a horrible idea though is over-writing fat calls against a
stock position you've ridden down, or are riding down, or just own and
are getting ill with. The relatively small money you take in vs. the
stock will barely ease the bleeding, and will only annoy you to no end
if/when it ever turns."