In stocks slang, a bag holder is an investor who owns shares that fell in price AND are unlikely to rebound anytime soon.
For example, if you purchase shares in a company at $5 and the price crashes to $1, then other traders may refer to you as a bag holder.
In other words, you are now holding a stock that is worth significantly less. Furthermore, it is unlikely that the share price will reach that level again.
Well, not anytime soon at least.
The term comes from the phrase “left holding the bag.”
The suggestion here is that most traders managed to “escape” from the stock or cryptocurrency in time. The only people left behind are the unfortunate bag holders who now have to wait around and hope that the price recovers.
Technically speaking, the term “bag holder” means that someone is stubbornly holding onto a stock that is slowly becoming worthless. However, many traders will use it to describe people who bought into a stock just before it crashed or underwent a correction.
Am I really a bag holder?
The problem here is that a lot of traders will use this phrase far too liberally.
Take the following example.
Jonah buys a risky penny stock at $3 per share. His friends told him to jump in on the action because some random “stock guru” on TikTok advised everyone that the stock was going to the moon. The next day, the “pump” turns into a “dump” and the price plummets to $1.35. As a result, Jonah now holds shares in a random pharma company that he knows nothing about.
Meanwhile, Sandra purchases shares in VISA just before a big tech correction. Consequently, the price falls from $240 to $205. On StockTwits, other traders are gloating about how everyone who bought into the stock at $240 are now bag holders.
However, in this case, Jonah is the real bag holder, not Sandra.
Why? Because VISA is a blue chip stock with strong fundamentals and a bright future. Whereas random pharma company ABC is a stock-diluting dumpster fire that is teetering on the brink of extinction.
Basically, Sandra’s shares are far more likely to recover and reach a new all-time high. On the other hand, Jonah’s position will probably continue to fall in value until it is practically worthless.
Can you see a future?
If you are wondering whether you are a bag holder or not, ask yourself the following questions.
- Does the company have a future?
- Why did I invest in this stock in the first place?
- Are the company’s fundamentals solid?
- Is the company growing?
- Is there a logical reason why the stock might rebound at some stage?
If you are struggling to find positive answers for the questions above, then you might be a bag holder.
Basically, it could be time to cut your losses and hit the eject button.
“These bags are heavy.”
If a trader says that their “bags are heavy”, it means that they are “bag holding” shares in a company or crypto coin that they are eager to get rid of.
In other words, they jumped into the stock at a high price, just before it fell.
As a result, they are now (impatiently) waiting and hoping that it will rebound. However, the urge to sell and cut their losses is growing.
All in all, it means that they are mentally struggling to hold onto the stock in question. They want to “drop” the bags, so to speak.