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You want to know one thing about the stock market that really drives me bonkers? Stocks that go on trading halt forever. I’ve got this stock in my portfolio that has been on trading halt now for over 12 months. Now, this sort of thing doesn’t happen all of the time, but it does happen. And the trouble is when it does happen, if you’re holding that stock, there’s absolutely nothing you can do but wait.
So, what’s the solution? If you’re holding a stock that goes onto trading halt, there’s really nothing you can do until the exchange decides to let it come off trading halt. Now that might be one day, two days, five days, or a year or more. So, the only thing that you can really do is make sure that every single position that you hold in your portfolio is very small. A small proportion of your total assets, your total capital. Because when your position size is small, this sort of thing doesn’t have to bother you.
Now, this stock is annoying. Yeah, it’s driving me crazy, but it’s still only a very small proportion of my total trading account. So, it doesn’t really matter from a financial point of view, it’s just annoying. And I wanted to make sure that you’re aware that this can actually happen because if you are stuck with a position that goes on trading halt for a long period of time, that capital is tied up. And if you’ve got a 10 or 20 or 30% position size or 20 or 30% of your capital is in that trade, then you are going to be completely hamstrung in your trading account. And if it never comes off trading halt, you’re absolutely screwed.
So when you’re sizing your position, make sure your exposure on each position is a small percentage of your account because trading halts can happen and you as the trader cannot control the duration, the length of those trading halts. That’s something that’s up to the exchange and the company. And if it doesn’t come off trading halt for several weeks or several months, you don’t want too much capital tied up in that position.
So, my name’s Adrian Reid, this is Enlightened Stock Trading. And trading halts is one more reason to make sure that you keep your position size small because if a trading halt happens to you, you don’t want it to limit your ability to continue to trade effectively and manage your account. Keep your position size small. Until the next video, I’m Adrian Reid. This is Enlightened Stock trading. Bye for now.