We have a second bout of intense selling occurring this week. The first bout on Tuesday felt like pure panic. As is often the case when there is panic, stocks bounced back very sharply.
This second bout of selling is quite different. It doesn't feel panicky, but it is very steady, and support levels are falling like dominos. The lows that many stocks hit on Tuesday are not starting to come into play. If they don't hold, that is likely to trigger some sell stops.
My best advice when you are losing money is to sell something. Many times market players are hesitant to sell into weakness as they are so often warned about not panic selling. So instead of doing something, they end up frozen and just watch as their stocks continue to sink.
The 'don't panic sell' advice makes sense in action like we had on Tuesday, but it doesn't make sense on a day like today. It is hard to even define what actually constitutes 'panic selling,' so it tends to be difficult advice to implement.
When you are losing money, the best thing to do is to stop losing money, and the only way to do that is to sell. People tend to be afraid they are going to sell at the exact wrong time. Perhaps they will, but they can always rebuy. The important thing is to reduce risk, get your emotions under control, and then prepare to find ways to recoup your losses.
Most people just sit and hope that things bounce back. Quite often, they do, but taking a more active approach helps you maintain better control, and that relieves some stress.
We'll see how we close today, but right now, many of the folks that 'panic sold' on Tuesday may have actually made the right move.