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Should I Cash In or Hang In?

After the Google fiasco on Thursday, the entire US market seemed to take a dive on Friday. As a result, a few of my strongest positions reduced in value.

Fortunately, I was able to finish the day without seeing my equity value fall too far below the past few days’ values. The cautionary tale in this story though is about hope and fear, and how you should hope for values to increase and fear to lose more money.

For the last week, this mantra has helped me keep positions open to try and ride out the positive trend for as long as it goes – ie.let my winners run

But yesterday, I have to say that for the first time in a few weeks, my discplined approach was being shaken.

As I sit here today, I’m looking at a portfolio reduction of about 26% from Thursday’s close, and I find myself HOPING that things will turn around next week instead of FEARING that I’ll lose more money.

I’m honestly caught in two minds between:

  1. Closing all my positions first thing on Monday and then sitting on the cash until the crazinness subsides (I don’t want to lose any more value).
  2. Sticking to my rules and just letting my positions ride it out.

There’s an interesting consideration here in that theoretically/scientifically, if I’ve picked the positions on sound priniciples and traded with longterm trend then things should play out as planned and all positions should have enough room in them to ride out any declines in value until things pick up again BUT, as we all know; the market is a herding beast made up of animal spirit and friday’s US decline looks to be an indication of a sudden drop in confidence.

Is it an indication of a fearful market?

As one of my readers put it yesterday, is now the time to be looking at RISK-OFF positions?

Certainly I think it could be a week or so to have a few shorts in play – unfortunately I don’t have any open right now.

Tough one, and a fine example of how trading psychology can influence your trading.

Should I cash in or hang in?

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About Lee

Unconventional trader embracing intuition, martial arts & taoist philosophy to achieve two simple goals in life: Trade well. Be happy.

2 Responses to "Should I Cash In or Hang In?"

  • sean
    October 20, 2012 - 12:47 pm Reply

    It would seem fear has gripped you, and rightly so, it happens to all of us, I can only tell you what I would do in this scenario though. And that would be ride it out and stick to my plan. There’s no point in guessing the market might fall next, no body knows what it will do, I would check all my stops are in the correct places and watchthem Like a hawk. All the best though.

    Sean

  • Lee
    October 20, 2012 - 6:48 pm Reply

    Hi sean, your thoughts seem to echo quite a few others who hve been good enough to offer me their own. The consensus certainly seems to be stick to the plan and hang in until exit signals are fully visible. As vince stanzione is often quoted as saying, “trade what you see not what you think!”

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