Even as we’ve been kept up at night wetting our sushi night clothes in horror of losing trades and jumping off our abode, most losing trades come from misconceptions hatched inside our brains.

This is how nearly all losing trades happen:

1 – Double down. Whatever dummy came up with this idea had to be a guy with a lot of money. The original idea of doubling down must have come from a drunk well-off guy in Las Vegas gambling at the MGM Grand Hotel and Casino. The model of doubling down is easy, if a stock you are holding drops 15% in price, acquire double what you first bought. Over time, as poverty-stricken common folk got their hands on the concept, it changed into averaging down, meaning purchasing any additional amount of a stock that you are hanging on to when it drops 10 % or more.

Legendary stock trader Nick Leeson mastered the skill of averaging down into losing trades, and took it to a whole new level. This double down stock trading whiz kid caused the collapse of Barings Bank, United Kingdom’s first investment bank, for which he was sent to jail.

Never fling good money after bad. Never risk more than you are trying to gain.

2 – Value investing. This stratagem must be the mind spawn of immoral institutional traders who wish the dumb common folk will help them in dumping their longs in a down trending market. The idea of value investing is uncomplicated, look at the P/E ratio. If the average P/E ratio for a industry, such as Tech, is 18 and you find a company with a P/E of 12, then you are purchasing this company at a deep markdown, a real valuation pearl, true? Not!

There is a rationale behind why a company has a P/E less than a industry arithmetic mean, investors do not like it as much as they like other companies within that sector.

The majority of valuation entry points include buying a business that is within a downtrend. Therefore, most value investors buy low and sell even lower.

Never purchase a company that is within a downtrend no matter how low the P/E ratio is.

3 – Cling to a bad stock trade until it comes back. This is the cerebral retard strategy. Stock traders that do this have no business investing in the stock market. Their like that monkey who grabs the fruit and then the trap closes on the arm. If the monkey would let go of the fruit, he could escape from the trap. But the monkey never lets go.

Time is value, it is the material existence is made of. Way back in March of 2000 the Nasdaq traded at 5,000. Today it trades at less than half that at 2186. So for the last 10 years, you would still be hoping for the market to come back with this strategy. These are 10 years you could have been investing and making money, eternally gone. With simply 10% a year, you could have doubled your money. But it is worse than that.

Most retards that use this line of attack can not do math. Let’s say the Nasdaq dropped from 5,000 down to 2,500 or 50%. The majority of monkey retards believe if the market goes up by 50% they will be back to break even. Not true. The Nasdaq would have to go up 100% to rise back to 5,000.

Never use buy and hold on a losing stock trade. Cut your losses as swiftly as you can.

In the video below I natter a little about the farce that is value investing. [vimeo:13474366;[link:losing trades];http://vimeo.com/13474366?pg=embed&sec=13474366]

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