Yesterday, I bought DDD as part of my portfolio build-up betting that the market will continue upward. Nevertheless, by the end of the yesterday, DDD released news that they will do a secondary offering of $100 million. While this amount can be “argued” to be relatively small compared to their market cap; a dilution is a dilution no matter how you look at it. Sometimes you have to look at the reason why there is even a need for dilution at all.
Thus, for those who doesn’t want to cut the loss quickly (or to acknowledge that they may be wrong), they can argue that the secondary offering amount of $100 million is not enough to be worrisome. So they continue to hold.
Meanwhile, I learned long ago that it is not worth the effort to rationalize away the bad news. Whether the price action can recover from the bad news is not something I want to entertain myself with while I’m holding the position. I just want to get the fuck out of the position as soon as possible. I put a market order to sell at the open and got filled $1 below my entry point. I’m actually very happy with my fill. And even more happier now because DDD price has gone down to $3.25 against my entry point as I’m typing this post.
That additional $2.25 per share against me would have hurt my pocketbook quite a bit since I bought in size.
It is from numerous times of seeing how cutting my losses quickly saved my day (like today with DDD) that it becomes very easy for me to develop the habit of cutting losses. Yes, there will be times that after I cut my losses, the stock will go back up forcing me to pay a higher price to get back in. But in the long run, I still come out ahead because these small gap of paying higher price to jump back in is insignificant compared to the gigantic losses of not cutting your losses quickly.
Good Hunting!
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Nice, that puts you in a position to think unemotionally about possible reentry at a later time.
Exactly! Thanks for the comment.
Corrected a typo. Price was actually $3.25 lower than my entry point; not $2.25. Thus, I saved myself from an additional $2.25 in loss per share because I cut my losses quickly.
Nice work. Perfect mechanical execution. Personally, I’m (almost) as pleased with a trade that is jettisoned as soon as it turns against me, as I am with a decent winner. Even though being pleased with a loss sounds retarded.
“Even though being pleased with a loss sounds retarded.”
That is your ego talking. We should all be please about taking small losses as well as taking profit of all sizes.
Thanks for the comment!
I put a trailing stop loss order in with every buy.
It’s saved me a few times.
As with most valuable lessons, I learned it the hard way taking staplers to the face with a few big losses I tried to rationalize before capitulating.
A 10% stop loss is better than a 20% donkey punch with a side of denial.
I am not smarter than the market, but I am smart enough to use a stop loss!
“…I learned it the hard way taking staplers to the face with a few big losses I tried to rationalize before capitulating.”
We all have to learn it the hard way to learn to take small losses. I’ve been there and done that. We should be grateful that we actually learned from the mistake.
There are many out there who keep on paying the hard lesson without “getting it” simply because their ego keeps getting in their way.
Thanks for sharing.
If you liked yourself for cutting this baby then, tou’re going to love yourself today.