Its tough to see but Tennessee Tuxedo and Chumley appear to be kicking back in their trading room after a nice trade.This quick post is about emotion and/or ego.
On Monday I bought a stock across the board, as long term idea, that has moved up a lot. The particulars don't matter. I am quite certain the story has not changed in the last 72 hours and the stock could have just as easily gone down.
When you enter a new position you will sometimes get a big-ish move right way. If that move is up you are not suddenly smarter and if the move was down you are not suddenly dumber.
If you realize that occasionally there will be a big move in a new holding and that it does not mean you are smarter or dumber then you do not need to let emotion about the trade get in the way of your process.
11 comments:
Roger.
Your 'psychology' label for this post is right on.
When I was investing for a while I came to the wrong conclusion that only suckers bought and held stocks. I assumed that all of the "Wall Street insiders" (since I wrongly concluded they were all scumbags) were actively trading all the time and were directing us to hold on so that they could smoothly get out when the market went down.
So of course I tried this myself and my portfolio suffered. Now I buy what I consider to be good stocks and ETF's that pay a decent dividend and ride out the market looking forward.
I even recently bought some non-mortgage REIT's at the bottom. I intend to buy some home builders early next year as well. But not a big percentage bet.
Your site (and a lot of research) has done a lot to get me back on track. Thanks.
Jack
Have a safe hike.
Speaking of psychology Rog, you spend a lot more time gloating over a 2 day run, than your losers....
Not sure that buying at the peak of the market is great timing.....
isn't it better to buy on the dips (like 5 weeks ago), and sell at the highs??? I'm thinking your portfolios would lag a bit less if you mastered this simple technique..
Anon 6:16, alias The Heckler.
I might suggest as well that your portfolio might have done better if you didn't load up on double shorts on Aug. 14th and not blame it on Roger. But it's your money isn't it?
Since you think Roger's a dolt and incapable of any serious advise on the market, perhaps by now you're ready to regale us with your stellar predictions for the market along with some great new stock picks. We're still waiting. And waiting...and waiting...and waiting....
Until then please shut your useless pie-hole and learn something here for a change.
Please don't feed the troll. He will eventually go away.
i'm glad you keep mentioning small yet important psychological barriers, and how it's okay if you just try to think about, and stick to your initial ideas.
I recently stopped out of a position, which then proceeded to bounce back; i didn't mind - i had a plan and something happened, i don't control the market.
I cut my losses and bought another spec which then went down just a spot - no stoploss yet, it will eventually be part of the plan. Future Trailing Stops are what I call them.
6:16, please share your "simple technique". I can't wait!
What you say is true, but it sure does feel good when the buy moves the direction you anticipated. But a quick reminder of the dumber/smarter aspect is in order.
Roger, You're right that a big immediate move doesn't necessarily mean anything one way or the other in terms of how smart/dumb you are. But it might dictate action, and your process should recognise this.
Surely the key thing is the RELATIVE immediate moves post your initial action. If your stock shows sharply different performance from peers/the index or whatever other benchmarks you use, it's become that much cheaper or expensive and you should add or reduce in accordance with this. If it moves in line with benchmarks then you only need add or reduce if you want to use it to use it as a vehicle to play market direction.
In my own trading I try to keep stock ideas as just that, and trades on relative value/newsflow, and I use index futures to stay on the right side of tidal movements in the markets. This stops me selling stocks I like when everything is going down.
Roger, You're right that a big immediate move doesn't necessarily mean anything one way or the other in terms of how smart/dumb you are. But it might dictate action, and your process should recognise this.
Surely the key thing is the RELATIVE immediate moves post your initial action. If your stock shows sharply different performance from peers/the index or whatever other benchmarks you use, it's become that much cheaper or expensive and you should add or reduce in accordance with this. If it moves in line with benchmarks then you only need add or reduce if you want to use it to use it as a vehicle to play market direction.
In my own trading I try to keep stock ideas as just that, and trade on relative value/newsflow, and I use index futures to stay on the right side of tidal movements in the markets, or try to, as I find this exceptionally difficult. But at least it stops me selling stocks I like when everything is going down, or shorting too much of things I don't like when sharp techical bounces are a daily unforseeable risk, as in August.
Roger:
Would like to get your opinion on one of my portfolios. Others feel free to comment also.
Cash 10.4%
APF 4.0
BRK.B 7.8
CAH 7.3
COV 7.4
DBV 7.4
HPQ 7.4
JXI 7.3
LTR 8.0
MOO 6.9
PEP 7.8
PFP 6.9
SWZ 4.0
Thx in advance. Jon
Opps. Forgot
FIREX 7.4%
Thx, Jon
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