Conditions such as the ones we are currently experiencing are not new. This time it's sub prime/credit squeeze/whatever label one wants to put on it. Before it's been tech stocks, tulips, Poseidon, the South Seas Company. Doesn't matter.
People react the same way; greed on the way up and fear on the way down. People make the same mistakes;
Mistake 1 - catching a falling knife
1. Centro's a bargain at $8.
2. Centro's a Bargain at $7.
3. Centro's a BARGAIN at $6.
4. Oh ****, Centro's at 40 cents
Mistake 2 - not protecting your profits
1. Get into ACB at $0.30
2. ACB peaked at $2.20
3. ACB down to $1.50. It was $2.20, it'll recover.
4. ACB down to $1.00. It was $2.20, it'll recover. I think.
5. ACB down to $0.50. Oh why oh why didn't I sell it when I had a decent profit on hand.
Trading profitably is really, really simple.
Cut your losses short.
Let your profits run.
There are lots and lots of ways to achieve these simple goals. Unfortunately, the vast majority of traders/investors don't because even though the rules are really, really simple, they are really, really hard to stick with.
It's times like these when the truth of the rules really shines through.