Insights

How to Learn to Accept Losses in Investing

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Accepting Losses

In the world of financial markets, every investor may face a situation where their entire portfolio or individual positions start generating losses instead of profits. Depending on market conditions, this situation can last for a long time, with the drawdown reaching significant levels. Many traders, even those with years of experience, may not be prepared for such events. Therefore, understanding how to accept losses in investing can be valuable.

What’s a Death Cross in Trading?

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Fans of technical analysis in financial market trading advocate not only for the analytical but also the predictive value of indicators and their combinations. According to its founder Charles Dow, the price reflects everything, and therefore, the mathematical dependencies (indicators) derived from price charts can highly likely predict future market behavior based on historical data. This is especially true for trend indicators, which reliably filter out insignificant price spikes and accurately reflect chart trends. One of the technical analysis patterns that has been used for decades and proven its usefulness is the “Death Cross.”

What is Correlation and How to Use It in Trading and Investing?

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Investors, when selecting securities for their portfolio, often encounter situations where, for instance, the price movements of several stocks are identical. Essentially, the dynamics of such assets demonstrate a close connection (correlation) between them. Including a set of such correlated instruments in an investment portfolio can lead to a significant increase in both returns and risks. The correlation coefficient helps assess the depth of this connection.

What is Goodwill and How to Use It?

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The dream of any investor is to accurately determine the current and future value of a company issuing purchased securities. This would simplify tasks like calculating returns, assessing risks, and most importantly, creating an investment portfolio optimal for the stated goals. Unfortunately, precise calculations are practically impossible at present. The problem is that a company’s value reflects not only tangible assets (land, buildings, equipment, working capital, etc.) but also intangible, including non-identifiable assets. One of the latter is goodwill.

Is Impulsive Trading on the Stock Market Worth It?

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Experienced traders, successful investors, and renowned analysts emphasize the importance of trading in the stock market based on clear rules. While novice traders attentively listen to their arguments and advice, they often forget or are unwilling to apply them in practice. Most beginners make trades based on their feelings or unsupported judgments, leading to impulsive trading.

What is Take Profit in Trading?

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Stock market trading always involves certain risks. Investors who follow a long-term investment strategy rarely pay attention to current price fluctuations. They focus on the inevitable growth of the stock market and are confident in making a profit at the end of the planned investment cycle. For those engaging in speculative operations, short-term gains, and working on declining asset prices, such fluctuations can bring many troubles. Both losses and missed profits are equally critical for them. Stop orders help combat these issues: stop-loss in the first case and take-profit in the second.

Emotion Control: How to Trade with a Cool Head

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Most beginners and even many experienced investors believe that success in financial markets is determined by the right strategy and trading system. However, after some time, they face disappointment as perfect signals and precisely formulated capital and risk management rules lead to losses instead of the expected profits. The reason is that these ideal rules are not followed under emotional pressure. Thus, controlling emotions is extremely important for market participants. Everyone should know how to trade with a cool head.