Death by Choice in Stock Markets

Leverage- Stupid.

Adding to an existing leveraged position- Mad.

Leverage on Margin- Dead.

Every time I tell myself not to do it.. Every time I do it.. Is that you?

Leveraging your way out of your senses is a sure shot way of losing money. This is especially true when the market is extremely volatile and you believe that you can benefit out of it. Consider this- You expect the market to fall and it does. Your belief is strengthened. You expect that the trend will continue and you take a short position. The market falls a bit more, you are proud of yourself. Now the market begins to move up, but you are not convinced. You keep your short position open. Now you break even and you stare at an impending loss. Something inside you does not let you close your position. After all, you were in profit, how can you now back out at break even level. So you fight with that voice inside you that is telling you to close your position. You win. You continue as is. Now you see a loss. You are almost angry. You add to the leverage and then some more. Finally you get your lesson (along with the frustration of the process), but it is a bit too late.

 Next time, thinking that you are armed with this experience and ready for it, you dive again, only to be defeated by some other version of the game. The thing with these volatile times is that while you know the general trend of the market but you do not know the extent and the duration of the same. In other words, you do not know when the tide will turn in other direction. Better be safe than sorry. Avoid leverage.

2 thoughts on “Death by Choice in Stock Markets

    • Sure exact thing. It happened to me just recently. I was having a decent portfolio which I waited through all the bearish phases and it was turning to be in GREEN. Recently I started playing with Margin and BOOM. I had a huge loss. The earlier you know it the Better

Leave a Reply

Your email address will not be published. Required fields are marked *

*