"Cutting losses, cutting losses, and cutting losses are the three keys to successful trading"
Cutting losses is one of the most difficult decision for a trader to make and once you hesitate, it might burn a big hole in your pocket one fine day.
The recent rally in the Asian stock market led by Taiwan caught many traders by surprise. It's the magnitude, speed and force of the buying that is the killer that caught most short term traders. World market has recovered quite a fair bit, inching up for more than a month with the occasional profit taking. The herd mentality of missing out the market rally by regional Fund managers pushed the market up strongly with their buy orders.
Traders who refused to believe and stubbornly held on to their short positions got themselves burnt badly. I was told 2 traders lost more than S$300,000 in 2 days of trading and overall losses of more than a million from others in the trading arcade.
I asked one of the trader how long it would take him to recover from busting his account and probably start anew with a small trading capital of maybe S$30,000. He said it might take him more than a year or two to recover. Surprisingly, he is still very optimistic despite the setback.
Though I was not caught, I did not make a killing in such a big move, on hind sight, what a waste. Being very close to the market and a micro trader, I did not capitalise on this move.
The cleaner in our arcade told a friend that she was sad for not buying enough stocks and missed out on such a furious up market. I was a bit surprised and shocked to hear that and probably she might even make a better trader, who knows.
For account 2, I have liquidated the Tw/Simsci spread at a small loss and reduced the Topix/Nikkei spread to 4 lots. Profit to date is S$2,045. The unreliable pat's system automated trading makes me very cautious in my execution of trades, it can be rather costly if I am caught with a one sided execution.