The Worst Thing We Can Do Is To Do Nothing - Brad Henry

Saw this gif in Twitter recently when someone was talking about the recent crash of #bitcoins (by the way #bitcoin has dropped 42% from the high 19,000 to 11,000 as of this writing). Some people could have suffered huge losses if they bought at the top and held on till now.

This does not only apply to bitcoins. In past market crashes, we see many people having huge losses simply because they held on to their positions for too long. This can be attributed to human tendency for not wanting to be in the wrong and the tendency to stay in the comfort zone. "It will rise again. Doesn't market always rise?" "I'll hold until the price goes back to my entry price". Sometimes it may not happen (think Lehman), and you risk ruining your investment. Do not hold on based on hope.

I advocate that before you enter a trade, you should already have a clear strategy. An entry rule and an exit rule. And when the trade goes against you, be prepared to admit you are wrong and exit. There will be opportunity to go back in later.

And the quote from Brad Henry resonates this perfectly:

The worst thing we can do is to do nothing