Anonymous asked in Business & FinanceInvesting · 4 weeks ago

Why does anyone lose when they trade?

Let's say I want trade but I invest in a stock that goes down (which I clearly didn't anticipate) can't I just wait for however long it takes for it to go up and sell it then. Can you switch roles from being a day trader to a normal trader whenever it's convenient or are there specific time boundaries. I am sorry if I am asking stupid questions I'm still in the learning process.

2 Answers

  • Anonymous
    4 weeks ago

    Yes of course.   No one ever loses money unless they sell at a loss.

    "can't I just wait for however long it takes for it to go up and sell it then"

    Yes.  But here are the reasons that may be a bad idea:

    1)  If the fundamentals of the stock have changed for the worse (which is why the stock is less valuable to investors), why hold onto it?   Intentionally owning a dog is silly.    

    2)  If the fundamentals of the stock are still good and the price reduction is due to external factors such as normal market correction or broad political/economic news, why would you sell it?   When the stock recovers, why not just keep it?    Selling a good performing stock is silly.

    Sell your dogs and let your winners run.  It's a philosophy that has worked very, very well for me.

    Day trading is for noobs and gamblers.  It's not investing.   I don't buy stocks I wouldn't want to hold and therefore I rarely get stuck with a dog.  

  • 4 weeks ago

    You can always wait and hope it goes back up, but your money is locked up during that time period.  If other stocks are doing well, why not take a loss on your current holding to get your money into something that will rise quicker? 

    For example, if you had bought American Airlines in Jan 2020, you'd be in the hole 60%ish right now.  If you had sold it for a loss, you could have put your money into Amazon and been up 60%ish.  If you still hold American Airlines, then you're just sitting at a huge (unrealized) loss waiting and hoping for it to go back up.  The reality is that it may be years if it ever gets close to where it was before.

    There are special accounts and rules for day traders.  Being one does not mean you have to trade everyday.

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