What Is Stock Floating Loss and How to Overcome It
Navigasi - Floating loss in stocks is one of the scourges that is quite frightening for capital market players. All must feel, we also often. It's even very strange if you've never experienced floating loss.
|What Is Stock Floating Loss and How to Overcome It|
But the question is, how to overcome it. If you can reverse floating loss into floating profit. Of course it takes a fairly precise technique. We will share experiences in the capital market.
Definition of Stock Floating Loss
Before going any further, we will explain in advance what is the meaning of floating loss stocks. This means that an investor suffers a loss due to a decrease in stock prices.
For example, we bought shares at $2 in January. It turns out that in April the price was $1. Then there is a difference in losses of minus one hundred rupiah, or twenty percent.
However, this is called a floating loss of shares, because it has not been realized, it has not been sold at a loss. For this reason it is called floating loss. This is because stock prices keep fluctuating, up and down. There is a possibility to go back up to the price of $2 or even more.
Causes of Floating Loss in Stocks
There are several circumstances that do cause floating losses in stocks. First, the company's performance suddenly fell. After the financial reports come out, what is usually profitable is actually a loss. Finally the price dropped.
The second circumstance is, the price is already too high. When the price continues to climb, there is a possibility for shareholders to take profits. That's where the stock price will fall.
If we buy at a high price, then in the end the possibility for floating loss in stocks is very large. Avoid this as much as possible by buying shares at low prices, as we have shared the tips here.
The final cause is the JCI collapsing. This condition will be very difficult to avoid. Everyone will be affected. Of course the stock prices will go down. This is where many shareholders experience floating loss.
Pay attention to Support and Valuation Points
We always pay attention to the lowest support point before buying stocks. Usually we withdraw within three years. The goal is to estimate the worst possible floating loss.
Suppose I buy ABCD stock at $2. We then see the lowest support point in three years is $1. So we have to think, the worst possibility is that the stock price will fall to that number.
Or watch out for valuations. That is, we buy stocks with a PBV valuation of 1. So there will be a possibility that the price will fall to a PBV valuation of 0.5. So we have to anticipate from the start.
We have to remember this so that dealing with floating loss becomes much easier. If it's really deep. Then it will be more difficult. Especially friends who buy fried stock.
The potential for floating loss stocks can be very deep. For example, buying at $ 10, the price could touch $ 1. This is very likely to happen. Are you strong. Or is it better to cut losses?
How to Overcome Floating Loss in Stocks
But if the average is down from the start, you already know it will go down. So it's like buying with installments. While floating loss, psychologically in our brain we lose. Go down very deep.
First, ask in our logic, is there a possibility that the price will go up again? Either from the sentiment side, from the performance side, or from another side. If not, it's better to cut loss. If there really is, this is where we are sure to overcome floating loss in stocks.
The technique is to average down the purchase price of the shares that we have executed as low as possible. If we don't rush to average down. That means just down 10% is average down.
We are waiting for the share price to drop by 30%. Why 30%? Because at that number our buying price will change drastically. For example, we buy at $ 10, go down to $ 7, then we can average down at a final price of $ 8.
Unless you buy too optimistically. All funds have been entered. So this technique is useless. Remember, we must always prepare cash funds in stocks, no matter how positive the market conditions are.
Even if it's down 30%, still don't put all the money in. Wait one more position. That is the possibility of dropping to 50%. If it's up to fifty percent, then put in more funds so that our total purchase price goes down even more. But there is one note. The price condition when we are going to average down technically is in a sideway position. Not still turbulent. So the condition where the stock price is experiencing a period of consolidation.
Those three stocks are usually getting ready to climb again. So the stock is in a state of oversold. In other words, we are ready with the reversal point of the stock.
|$ 10||$ 1000||$ 10|
|$ 8||$ 500||$ 9|
|$ 7||$ 1000||$ 10|
The Secret Floating Loss Stock Technique
The next difference in the technique of overcoming stock floating loss compared to average down is, we don't expect a reversal from floating loss to floating profit. Here we only hope to eliminate losses. Don't be greedy, again don't be greedy. It only eliminates potential losses.
Then the next secret technique in floating loss stocks is to set the selling price at the last price that has been averaged down. For example, if at the beginning we buy at a price of $ 9. Then we have averaged down to $ 5.
So set the selling price at $ 5, or if you want a little profit, to replace administrative costs, then at $ 5. Don't expect the $9 price anymore. The price has dropped again.
But after selling for $ 5, don't leave it then. You try to buy again at a lower price. Because it is most likely going down. There is a period of consolidation. That's when we buy. So this is where we can make money. Example of buying back at $5.
This is our version of the technique for dealing with floating loss stocks. Have a good try. Good luck and get Profit.