With 10% plus declines across all the major markets just this year its no doubt that many are suffering losses. While most of us can take the occasional loss or fight our way out of a losing position what do you do if you find that most or all of your positions have moved against you? Today we explore the emotion and action to work your way out of the funk.The first thing you have to realize is that it isn't a strategy flaw or some loss of capability on your part. When markets have such a severe move only those that are selling a product will claim that they made it out unscathed. It;s easy to fall for the hype and convince yourself that you are doing something wrong. Many new traders will change their strategy or find themselves trading a completely different market just to find the winners again... Bad idea. This is the worst time to change your game.
The next thing I will suggest is easier said than done. Try not to over react. While I can suggest that you take a hard look at your portfolio and try to close out the under performers, lets not go crazy and sell everything. Hang on to those names that have held up or have fallen less than the markets. These will be the first stocks to get bought up when the market finds some strength. It has always happened like this and it will continue to happen like this.
Finally... get to work! You should always have some cash in reserve to take advantage of these market sell offs. This is the time to find strength in this recent weakness and step in lightly. Also, when the markets do find some kind of relief rally, and they will, consider using common cost basis reduction techniques to work your way out of the losing positions in your portfolio. This can be as simple as selling calls against your open positions or against your portfolio as a whole. Just try to do this into strength, meaning you want to offer your calls on strong up days to collect the highest premium possible. Don't try to be a market timer here, just get to work.
Any trader who has been around for more than 6 years remembers trying times and while no one likes them, we know now what needs to be done.