Jesse Livermore in "Reminiscences of a Stock Operator"
Instead of hoping he must FEAR and instead of fearing he must HOPE. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.
A LOSS never bothers me after I take it. I forget it overnight. But being wrong - NOT taking the loss - that is what does damage to the pocketbook and to the soul.
The only thing to do when a person is wrong is to be right, by ceasing to be wrong. Cut your losses quickly, without hesitation. Don’t waste time. When a stock moves below a mental-stop, sell it immediately.
It is foolhardy to make a second trade, if your first trade shows you a loss. Never average losses.
“Most investors are Primarily Oriented toward Return, How Much they can Make and pay Little Attention to Risk, How Much they can Lose.” – Seth Klarman
Bernard Baruch in his book "My Own Story"
"One of the worst mistakes anyone can make is to hold on blindly and refuse to admit that his judgement has been wrong."
Baruch argues one should always BUY ON A SCALES-UP
"Many a Novice will Sell something he has a Profit in to protect something in which he has a Loss. Since the Good position has usually gone down the least, or may even show a profit, it is psychologically easy to Let it Go. With a Bad stock the Loss is likely to be heavy, and the impulse is to hold on to it in order to recover what has been lost. Actually the procedure one should follow is to Sell the Bad position and Keep the Good position".
Victor Niederhoffer in "The Education of a Speculator"
"During the 10 years I traded for George Soros, I never heard him speak once about a winning trade. To hear him talk, you'd think he had had nothing but Losers. Conversely, listening to the biggest losers, you'd think they had had nothing but winners."
There are so many ways to lose, but so few ways to win. Perhaps the best way to achieve victory is to master all the rules for disaster and then concentrate on avoiding them
You have to be Respectful of the knowledge of the Market. If a position goes against you by 10%, maybe somebody has understood something you have missed. When a position declines by 10%, we force ourselves to do an extensive and systematic review of the Fundamentals with both internal and external resources. We have to be sure nothing has changed. After the review, if nothing has changed except the Price of the stock, we have to Buy more. If we lack that conviction, we have to Sell at least 1/2 of the position. (Hedhogging)