Ask Colin

Is it best to sell immediately a stop-loss is hit or to wait for a rally?

In hindsight, we can always see that in some cases it was better to wait for a rally and in others to have acted immediately. There is no answer to this in real time.

A stop-loss is where you are wrong about a trade. If you are wrong, then you should get out and go into a better situation.

Sometimes, it is better to wait for a rally as already observed. But the same result can be achieved by switching into a better situation.

At other times, waiting will bring disaster. Bad news tends to follow bad news.

There is an old saying in Wall Street that your first loss is usually your smallest loss.

Once you are wrong about a trade, it becomes a "hope" trade. Professionals never ever trade on hope. Amateurs do all the time, which is why they get locked into big losses.

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