Averaging down to deal with losses?
One common technique for dealing with losses is called “Averaging Down”. Averaging down means buying more shares of a particular stock on the event that the stock goes below your original purchase price.
An example would be originally buying 100 shares of ABCD at $1.00 per share, and buying another 100 shares of ABCD at .50 a share because it went below your original entry point.
Cutting your losses?
The best way to deal with a penny stock when it goes completely against you is by simply cutting your losses & cutting them early. You can do this automatically by setting up a conditional order called a “stop-loss”.
A stop-loss is designed to literally stop your account from taking further losses by allowing you to set a minimum acceptable price at which the stock must always be greater than. If the stock falls below this price the stop-loss will trigger & automatically sell your shares at the current market bid.
A stop-loss is great at protecting your trading account from critical losses, and making sure fear and greed don’t persuade you to stay too long in a losing trade.
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