The Alphabet · step 6

What does losing look like?

The dip everyone meets

one holding, a few months what was paid · $65 the fall · $80 to $60 a quarter of the top fall by half and it takes doubling to get back the line was made for the picture
one holding, a few months paid $65 the red bracket: $80 to $60, a quarter of the top fall by half and it takes doubling to get back the line was made for the picture

One holding over a few months. The dashed line is what was paid. The bracket is the fall from the highest point to the lowest after it, and the stretch under the dashed line is a loss that sat on the screen without being taken.

Most things you buy can be worth less than you paid at some point, often right away: the spread alone starts you a little behind. A dip is not a sign you did something wrong. It is the weather everyone meets.

While you still hold, a loss on the screen is unrealized: it is what you would lose if you sold right now. It becomes realized when you sell. Until then it can shrink, or it can grow.

That cuts both ways, and this is the part that hurts people. "It is not real until I sell" is true, and it is also exactly how a small loss is allowed to become a large one. Holding on is a decision too; it just does not feel like one.

The arithmetic is not kind. Fall by ten percent and you need to rise about eleven to get back. Fall by half and you need to double. The deeper the hole, the longer the climb out, which is why the size of a fall matters more than how it feels.

Said with a food truck

You paid sixty-five for a slip. Then the truck has a slow winter, and the best anyone will offer is forty-five. On paper you are down twenty dollars. You have not lost it yet; you also cannot spend the money you thought you had.

Two owners sit in the same spot. One sells at forty-five, takes the twenty-dollar loss, and moves on. The other holds and waits for spring. If spring comes and slips go back to seventy, the second one looks wise. If the engine dies in March, the first one does. Neither of them knew in January.

That is step six. The next chapter is the answer many experienced traders give the two owners: decide where you get out before you get in.

Nothing here is advice. The whole ladder is on one page; the app behind it is free to start - the door opens to any address. Education only. Pumpstradamus is a paper trading app: no real money is traded, and we are not a broker or an adviser.