What is Shokasei? Explaining the mistakes that beginners tend to make when falling suddenly

2024-06-19

SYSTEM NOTICE

This content has been translated automatically by AI. Translation accuracy, nuances, and the author's original intent may not be fully reflected. In the event of any discrepancy, the original Japanese version shall prevail.

View Original Japanese

[Summary]

Shock selling is when you lose your cool due to a sudden drop in stock prices and sell in a hurry.

When there is a sudden drop, you will feel more anxious, but if you sell based on emotion alone, you may end up giving up near the bottom.

The important thing is to create rules in advance and determine the order in which to check them even when there is a sudden drop.

What is panic selling?

Shock selling is the act of selling investments out of fear or impatience.

This is especially likely to happen when the market as a whole plummets or when the stocks you own decline significantly.

why does it happen

Spooky selling is caused by fear of loss.

People tend to feel the pain of loss more strongly than the joy of gain.

Therefore, when unrealized losses suddenly increase, the desire to escape quickly becomes more likely than a calm judgment.

How to prevent

To prevent panic selling, advance rules are necessary.

Decide on a stop loss line
Don't make your position too big
Don't use too much credit trading
Check financial statements and materials
Consider whether it is an overall market decline or individual factors.

Summary

Shock selling is a common mistake made by beginner investors during a sharp decline.

Rather than selling based on emotion, check the rules you have set in advance and the reason for the investment before making a decision. The more steeply the prices drop, the more meaningful it is to decide on the order.