NEW YORK ( TheStreet) -- Tell me if you have seen this movie before.
A common mistake by traders and investors is chasing stocks. The excitement and the worry over missing out causes a rash decision and you push the "buy" button. Now you own the stock.
In an instant you receive the "order filled" message and simultaneously the price begins to fall, as if your buying caused it to happen. For the rest of the day the price continues to fall.
"OK," you say to yourself, "I will give it one more day," to which you find holding another day results in a greater unrealized loss. Within a few days you're so frustrated that breaking even is appealing.After a week or two, the once-bullish darling is finally approaching your breakeven point, and you stare at the monitor as if to use the "force" to lift the price higher. The stock price may get close, even within a penny or two, but sure enough, down it goes, leaving you with the feeling of "if only I lowered my offer price below that round number I would have exited with a loss of a penny or two." Not wanting a repeat, your next step is lowering your offer price a few cents "under" the round number peak from earlier. Sure enough, the third time is the charm and all is well again in the world because you're finally rid of that last embarrassment, while simultaneously promising under your breath never to do that again (for the 10th time). If you thought you were frustrated before, now you're in for a real treat. The stock you just exited out of for a loss of a few cents continues higher. During the same day you let your shares go, the stock closes another point or two higher. For the next four days, you watch in anguish as it becomes the Energizer bunny on speed as it keeps going and going.
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts