There are many stock market sayings that have been passed down from the sages of old; “The trend is your friend., Buy the Rumor, and sell the news, Always buy on strength”, to name just a few. There are hundreds of these sayings. I love them all because, after all, why would anyone not want to receive the benefits of wisdom of the sages of old?

One of my favorites is “Never hold (or carry) a losing position over night.” This advice sounds profound, meaningful and wise, sure enough; until you start thinking about it ;-)

What exactly does it mean to not hold a position over night (winning or losing)? Certainly this must have some valid purpose. If I had bought minutes before the close and the market went lower, should I then panic in the seconds before the close and exit? What if my entry were just plain random (no particular logic behind the buy or sell) and I had a money management method that turned such positions into winners. Should I code my secret money management system to exit just because my random entry was, well, a little more random? I think not.

It is always important to scrutinize words of wisdom coming from any source. A lot of this kind of thinking comes from a day trading mentality. I often marvel how people can even use a word such as “day trading” in a market that trades around the clock like the Emini S&P contracts. This contract gets started on Sunday night and stops only for a short time each day for system maintenance in the afternoons. It then runs until Friday close.

Oh yes, the markets have changed since the days of old when many of these sayings may have had at least some level of validity. So, in this modern era we live in, perhaps the saying would be changed to, “never hold a losing position over the weekend?” I don’t know. It still doesn’t seem to add up to anything making any sense at all to me. This particular saying couldn’t possibly have any validity unless it was followed by the word “if” or “unless.”

For example, don’t hold a losing position over night if you are in a margin call. Now there’s one that makes good sense. Brokers get really mad when you do this to them. In the event your alarm clock is broken; it pretty much guarantees you will get a morning wakeup call from your broker. Hey, who says brokers don’t give full service anymore?

I can think of another good reason to not hold a losing position over night. When you don’t want to be holding the position (for some good reason).

Still looking for sage advice on the stock market? I certainly hope not. Count your blessings! Give thanks we have been given a sound mind of our own. After all, if we didn’t have that, then who’s mind exactly might it be we would delight in having possession of (I am sure this is correct grammar)?

Next time you are thinking of a market asseveration to base your future market earnings upon, be sure to use your noggin. If you are not up for the task, I’d welcome your asking me to write another article on whatever great words of perspicacious market wisdom you might come upon. I’d be absolutely overjoyed to share what sound mind I have remaining ;-)