Investors Are Going To Start Closing Losing Positions

Just last week I had offered a fairly strong argument that we were near a short term bottom. And it wasn’t that I had some magic crystal ball or anything, I was just looking at all the technical indicators – as emotion free as I could get.

Now, after putting together a very strong rally over the last couple of days it seems that we are due for some investors to start closing out losing positions. Remember that most people saw their money evaporate during the July-August sell-off nearly 20% and are looking for any reason to “break-even.”

This really gets down to the trading psychology and theory behind support and resistance levels. You have to put yourself in the shoes of the other guy. Per the chart you can see that most people who are holding stocks right now have really been put through the ringer! And as we get closer to their break-even point, they will hit the sell button without any second thoughts.

People and investors especially hate to take a lose. They will virtually do anything to make sure it doesn’t happen. This also means holding a loss much longer than they should in hopes that it will somehow come back. Naturally, as soon as they see their bad investment come back (even a small loss of 5%) they will sell out of the losing position.

Have You Ever Held On Too Long or Exited Too Early?

The trading psychology of losing is the most fundamental reason why old support becomes new resistance. Add your comments and discuss the past situations where you have either held onto a trade that you new wasn’t good way to long, or where you exited with a small loss just to see the stock continue higher.

Believe me, we have all done it – learning from it makes you a better trader.

Get Email Updates (it’s free)

Watch The 1st Video In This Free 4-Part Series

I’ve been told by tons of people that you’ve got to either have a lot of money or a really killer system to trade options and win. Some new indicator or signal that will transform your portfolio.

And I’m sure you’ve heard the same thing and are sick of these expensive, dead-end courses and websites wasting your time and money.

Honestly, there is no “magic secret” to trading options. It simply comes down to an understanding of risk management, option pricing and strategy selection.

Instead of learning these lessons the hard way (i.e. losing your shirt in the market), why not take my free 4-part video course as I cover each area in detail. Plus, I’ll go over the exact checklist I use for selecting trades each month!