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Why do we often patiently hold stocks and wait to “come to shore”, but are very impatient to take profits when we have just made a very small profit?

“Surfing” is a term that is no longer unfamiliar to securities investors, to F0 who are new to the market or even to long-time investors. However, surfing is often not recommended by wise investors because the loss rate is more than 90%. Even in the stock market there is a classic rule that most investors know: the 90-90-90 Rule. The principle says that 90% of investors will lose 90% of their assets in the first 90 days of entering a short-term trade in the market.

Although it is so difficult to make a profit, why is surfing so attractive to the majority of investors? What is the psychological mistake that investors often make when surfing? These questions are answered by securities experts in the talkshow Money Secrets number 16 with theme Trade to live or Trade to die?

According to Mr. Hoang Thanh Tung – CEO of Finpros Investment Joint Stock Company, the hobby of surfing comes from the common mentality of people: it is good to collect losses but it is difficult to collect profits. In stock investment, investor psychology will quickly want to take profit even though the profit is quite small.

As soon as you enter, the words are sometimes easy to hold. Yes we just finished the price fell, hurt forever just got to the surface a little bit, a little profit, then the psychology of taking profit was very strong. Human psychology is constantly changing thus creating trading in the market. If everyone holds for a long time, the liquidity is not very high.

All markets require speculation. Without speculation, those who really want to buy and sell can’t buy and sell because the spread is very high. Those speculators will help those who want to really buy or sell can buy and sell faster and easier. Hence all regulatory markets allow speculation. If speculation was so bad, it would have been banned a long time ago.” Mr. Hoang Thanh Tung – CEO of Finpros Investment JSC said.

Why do we often patiently hold stocks to wait for the shore, but are very impatient to take profits when we have very little profit?  - Photo 1.

Agreeing with Mr. Tung’s point of view, Mr. Pham Luu Hung (Mr. X30) – Deputy Director of SSI Securities Investment Advisory and Analysis Center (SSI Research) said that fear of loss is the most avoidable thing. with investors. This is a fairly common bias when investors often evaluate the loss more heavily than the loss of profit.

Losing for them is a very heavy feeling. This is to say more broadly that my ego is too big, it is difficult to accept my losses. And realizing your losses is extremely difficult. Usually, people will keep their losses until they reach the shore, because it feels like they are not too bad. Sometimes this is even worse, I even go to “saw the table leg”, start buying average cost making the loss heavier. It is a mentality that should be avoided.

I invest only for profit. My ego is not very important, just leave it out. Get it wrong and then do it again, but if you keep trying to wait for the shore, averaging the cost is not a good idea, ” Mr. Hung gives advice.

What is a reasonable take profit or stop loss threshold for investors who love to surf? According to Mr. Hoang Thanh Tung, these thresholds depend on different securities codes. This expert gives an example with a blue chip with little price movement, investors cannot expect to take profit of 50%. This is an illusion. However, for stocks that have just increased by times, it is appropriate to set profit-taking or stop-loss thresholds of about 20%.

Finpros CEO also shared a simple general rule that investors must let the threshold of taking profit be larger than the stop loss. For example, one profitable trade must be enough to cover one loss plus taxes on both trades. Many investors even set a take profit twice the stop loss. By keeping the profit-taking threshold further than cutting-loss, according to Mr. Tung, there is hope to win the market.

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