Bouncing Back from a Negative Return

When you invest in the stock market, there is a chance that you will have to deal with a negative return at some point. In fact, most investors regularly lose trades. How you bounce back from a negative return will say a lot about you as an investor and your chances of success in the industry. Here are a few things to consider about bouncing back .

Hard to Come Back

It is important for you to realize the impact of a negative return on investment. Many investors mistakenly believe that you can get an equivalent return in order to bounce back after a loss. However, this is not true. You will actually need to make a bigger return than what you lost in order to break even. For example, if you suffered a 50% loss on your investment, you will then need a 100% gain just to break even. If you want to make a profit, you will need your stock to increase by more than 100%.

Attitude

Even though it may seem disheartening to experience a negative return, you cannot let it affect you as a trader. If you want to be successful in the stock market, you need to be able to handle an occasional loss. Everyone experiences losses and you cannot let it get you down. Many people let a large loss affect them and their future trading decisions. You might be gun shy after a big loss and stay out of profitable trading opportunities. However, if you plan on bouncing back from your loss, you are going to have to get back into the market and keep trading to make up for it.

Evaluate

After a big loss, it is a good time to reevaluate your investment strategy. Something might be wrong with your approach that led to the large loss. If this is the case, you may want to tweak your strategy a bit. Keep in mind that just because you have a large loss, that does not necessarily mean that you need to abandon your trading strategy and go with something else. Regardless of what your trading strategy is, losses will happen. Many people make the mistake of going from one strategy to the next, without giving the first one time to work. You have to be willing to commit to a trading strategy for an extended period of time before you switch to another one. Otherwise, you will never find anything that seems to work for you.

Position Size

After a big loss, you should also reevaluate your position size. Sometimes, you might have risked more money than you should have on a trade. As a result, the loss was a lot bigger than it should have been. In this case, you may want to get back into the market with a smaller position size. By lowering the size of your trades, you will be able to limit further losses.

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