Shrink Rap: A Recipe for Regret

Today, we have two questions that deal with the same issue, one that is relevant to large numbers of investors in the current market climate. It also happens to be one of the most common psychological hang-ups that investors face.

Dr. Hendlin, when trading (long- or short-term) I put what I know is way too much significance on the price at which I bought or sold a stock, and tend not to take an action confirming that a prior action was a screw-up (buying higher than I sold or selling lower than I bought). I am quite aware that this is not an intelligent way to think about things, and I occasionally overcome my reluctance to take such actions -- but probably would be a better trader/investor if this weren't a consideration at all. Any comments or suggestions?

-- D.K.

Dr. Hendlin, how come it's so difficult to sell a stock that's now at $5, when you paid $40 for it (and you don't believe that there's a chance in Hades that the stock is going to reach $40 again in your lifetime)? And why can't we sell it and get out when the $40 stock goes to $37? Thanks. ...