I completely don’t get the idea of bag holding the stock that dropped a lot and hoping it recovers one day.
Why don’t people just move on?
I mean, yes, if you really believe the drop is an overreaction that can be fixed quickly by the market, then of course you should hold it. But otherwise why not just dump and seek another big opportunity?
Taking me for example, my profile was down 10% by the bad earning reports of ANET and VRT. I accepted the fact and immediately switched to other stocks that can give me better return in the foreseeable future like NVDA, instead of waiting there for recovery. The time cost and opportunity cost is very important to me. I cannot imagine how much gain I would have lost if I decided to stick to these stocks.
When I determine whether I should be bagheld for a while, I just ask myself a question, “Imagine you are not holding it, would you buy it now?” If the answer is no (generally it is no), then I know there is no reason to stay here and should move on.
So I really don’t understand why bag holds, except the impact of the short-term trading tax — which is not a matter to me as a swing trader.
Edit: sorry ANET and VRT are bad examples (and I believe they are good companies!) and I am not against long-term investment. But from the trading perspective, I was asking more about why people would stuck in the hole probably forever, instead move on fast.
