Right, listen up. So you invested n money into an asset, hoping to sell it later for n+x [where x is greater that 0, blah blah blah...]
The asset is now worth, let's say, n/2. You ask yourself: is not the smart thing pull out now and halve my losses compared to staying balls deep?
You think the smart thing is to 'short' it. Well her's the big deal. You might have read my lesson 1, saying essentially that when you invest you should consider that money gone. Well let's elaborate on that. You put money into something, hoping that it will achieve a price you are happy with. The price is not just there yet and no signs of it getting there. The ONLY question you should be answering is: have the fundamentals changed? When buying, were I basing the idea to buy on some information that I now suspect to be false? Has new information surfaced? If not, then you are acting irrationally when selling. If you acted irrationally when buying, jumping on some hype train with no research, then this post is not for you because it makes no difference now. But if you actually did the smart thing and considered what you are getting yourself into before putting all the money saved for your mother's cancer operation into Bingus-coin hoping for it to go x50 because your favourite mumble rapper said it might, then your calculation of what to do now that the price is not n+x and not even n anymore is simply this: have the fundamentals changed. Because if not, then you might as well stick to your original decision, consider the money lost until the price reaches n+x. To sum up quickly: the diamond hands/never sell doctrine has solid grounds, provided the situation, as far as you can tell, has not changed. Attempting to be rational and make informed predictions is a way healthier way to invest than randomly clicking and then ogling charts all day, trust me. And this is not financial health I am talking about, but your real health, your sanity.