You can’t catch a 20% move in a stock if you are not willing to lose 5-6%. This is often a normal pullback within many 20% moves. Sometimes, stocks that pull back 5-6% from your entry won’t recover and you will have to book a loss as a swing trader. It’s Ok. Being wrong is often not a choice. Staying wrong always is.
In the same line of thought – you can’t catch a 100% move in a stock if you are not willing to go through a 20% drawdown. Note that I say a drawdown, not a loss. Two different things. If you time your entry properly, you should never let your position drop more than 5-10% below your purchase – depending on the situation. Once your position is up for the races and you are already profitable on it, 10-20% pullbacks are often normal. Riding big long-term winners often requires going through deep pullbacks. Not everyone is willing or could stomach a 20% drawdown in individual positions. This is why not everyone could catch 100% movers. The good news is that you don’t have to if this is not your style. You could achieve just as good (and often even better returns) by going after multiple 10-20% short-term movers than by chasing unicorns. There is not right and wrong approach here. Both approaches could be very lucrative. Both could be practiced by the same investor. What you need to realize is that each of those market approaches requires different state of mind.
