How To Deal With Seller’s Remorse…

On Wednesday, I spoke about winner’s anxiety. Today, I am going to speak about
another problem that many traders face…seller’s remorse. Seller’s remorse is
that sinking feeling you get after you sell a position, and then subsequently
watch it climb higher and higher… and higher.

For most people, it doesn’t matter whether you sold for a loss or a gain, the
feeling is still the same. The stock you owned just minutes/hours/days ago is
going on a terrific run and you are not able to participate in it. You got
scared, sold too early, and you’re now thinking about all the money that could
have been made.

This line of thought can be very destructive. Time is always much better spent
focusing on stocks that you do own, or are considering buying.  This is where
the future money is going to be made. You no longer have a stake in that stock
that was just sold, so why worry about it? 

It seems the reason that so many traders spend time worrying about stocks they
no longer own is that they still feel some sort of attachment to the stock. They
spent a lot of time researching potential stocks to purchase, spotted this one,
did all their homework and then bought it a point where they thought it had a
good chance to move higher. Lots of time and effort was put in to finding that
stock.  It met the necessary criteria for purchase, and the trade was triggered
and taken. Not only that, but they were right! And now the stock is heading
north without them.

Having stocks that were sold go on to great gains without you is something that
happens to every trader. Ninety nine percent of the time, you can bet that you
will not sell at the top tick, nor should you try. Still, people always want to
try and get the best price.  Don’t become obsessed with getting the best
price. You never will and most of the time you’ll end up selling too late
because you will be forced out of a position.

The best way to deal with seller’s remorse is to make sure that you have a
strict set of selling rules as part of your trading plan. Selling rules may
include initial stops, trailing stops, price targets, rules for dealing with
runaway moves, and more.  You have a checklist of criteria that must be met
before you enter a stock. You should also make sure that your selling criteria
is met before you exit the trade (either partially or completely).

If you sell a position without being triggered to sell by one of your criteria,
then watching that stock continue to run up should cause you great pain. 
On the other hand, if you sell because your rule told you to, then there was
really no choice in the matter.  You did nothing wrong.  You followed the
rules.  Sell when you’re supposed to, and there should be no remorse.  You just
move on. 

If you are a swing or intermediate-term trader, and you were completely stopped
out of the position, then you may also want to take that stock out of your quote
box.  No sense in watching it the rest of the day if you are not going to
re-enter.

There is nothing wrong with occasionally going back to review your trades to
determine if your selling rules should be modified.  This is productive, as it
may benefit future trades.  Just don’t start evaluating every sell decision five
minutes after you make it.  Focus on the trades you are in, and the trades you
are looking to enter, and forget about the trades that are finished.  There’s no
money to be made in them anymore.