First, you need to answer this question; What kind of investor are you?
Basically, there are two types of investors:
Daytrader and
Long-term Investor.
Daytrader:Daytrader is the person who buys and sells at the smallest sign of change in the price of the asset. It seeks to earn small percentages of profit in each operation. He spends a good part of the day watching charts and looking for signs of impending changes in asset prices. They are people who keep buying and selling all day long and making small profits one by one.
How does Daytrader work on loss?Simple: the stop-loss function is used. What is Stop Loss? It is a tool available on many exchange platforms, where you buy an asset and program a sales order if the price drops to a certain value (or drops a certain percentage). In this way, the trader guarantees an "acceptable loss" and can try to recover it in the next operations.
How does Daytrader profit?He needs to have more profits than losses and have a daily profit goal. Initially, for beginners, you'll have more losses than hits, but over time and with the accumulation of knowledge, your operations tend to be profitable over time. Do not expect to be a profitable trader overnight.
Long-term investor:The long-term investor usually does not keep up with price fluctuations every day and also does not have in the stock market his main economic activity. They are usually people who seek to use the remainder of their wages on investments that can make good profits in the long run. He buys assets and "forgets" them. Just follow up monthly to see if it's a good time to sell.
How does the long-term investor operate in the loss?When he decided to buy an asset, he studied and was convinced that that asset will be worth much more in the next months (or even years). If he bought, and suddenly, the value dropped, what do you think he does? He buys more in the next month! Or do you think he will sell and accept the loss? The more purchases you make at lower prices, the lower your average price will be. In this case, the asset does not need a "super-valuation" to be profitable. Just a good new price moment for the long-term investor to sell their assets.
How does Daytrader profit?If from the moment he buys, the asset only has its price increased, it remains at his mercy when he sells. The longer you hold, the more profit can be. If the asset falls, it must buy more and hold until a moment of inversion.
Conclusion:I see many people here asking:
"should I sell or hold?"The truth is that you should already know the answer the moment you bought the asset...
