Most of us know that emotions control every decision that an investor makes in any type of money related vehicle. Whether is be the stock exchange, real estate, art work or antiques, emotions ultimately set the final price on both sides of the transaction. Some investors have greater control over their emotions while other investors are destroyed by their emotional reactions to certain events.
One common occurrence I have seen many investors create, including myself, is putting a position in a stock at the wrong moment. My final article detailed the importance of time, while this guide will focus on the importance of staying focused and emotionally secure when things do not work out as anticipated. In years past I’d study a stock’s chart, the principles, the overall market health and everything else that I felt needed before putting a significant amount of money behind my beliefs. When things went wrong and I had been forced to sell for a little loss, I’d drop the inventory from my view lists and eliminate it from my memory. This was among the biggest mistakes I was making during my previous years of investing. The best investors examine their mistakes and learn why they were incorrect. If you do not learn from your mistakes, then you may continue to replicate them and never proceed to another level.
I was usually correct with my analysis on the specific stock but a lot of times I was too early with my entry point during a new up-trend. Months later, I’d encounter exactly the exact same inventory in my displays but it was now up 25%, 50% or more from my initial buy point and prevent loss. I’d be frustrated for selling my stock too soon and was getting tired of using rules and overlooking big winners which I sold for a loss. I knew money could be made in Wall Street by using the law of averages to my benefit and applying strong money management skills but I had to employ the rules more frequently. I began to practice what I had been taught by selling my winners fast and enabling my stronger stocks to ride their tendencies. With time, I had been experiencing a few more losers than winners but my bet was growing because these losers were smaller in size than the winners. The words written in the books were accurate; Jesse Livermore, Gerald Loeb and William O’Neil were accurate with their lessons about cutting losses fast.
Above all, I learned to maintain powerful stocks on my radar if I bought too soon and was forced to sell for a loss. My time was wrong and my ego was taken because I had been wrong, so I typically decided to keep away from that particular stock since it had already taken my money and my pride. Emotionally, I had been burned by the stock although this wasn’t entirely correct. Investing is a game of trial and error. It’s fine to buy a stock at the wrong time and market, just to buy it because they timing could be better. If you reduce the losses small and let winners to grow, the averages will ALWAYS work out, I guarantee. You need to be honest with yourself to enable the averages to work out. You can’t allow a stock to fall past your market and you have to attempt to always hold the most powerful stocks without selling them through a premature pullback. This all sounds so simple but it’s not! If it was so simple, we’d be extremely rich and the stock exchange would be everybody’s full time job.
I kept using my method of trial and error and began to record every thought and trade I made. With my revised doctrine set up; I continued to examine the stocks I was made to market and tried my best to re-purchase, even at higher costs compared to my initial position if the time was right. Even today I have these problems, the best traders of all time always had these problems and each fund manager must decide whether the time is appropriate. My most recent instance, which can relate to almost everyone in the community is Paincare Holdings, a stock that has been bought solely as a”test buy” I had been forced to sell. If things turn around and the overall market begins to rally, I’d have no problem purchasing the stock at a higher price than my initial position if the chance presents itself.
The moral of the guide is to make you realize that timing might be your only issue when buying stocks so never throw off a potential superstar as you bought too soon. Keep it on your watch list and be ready to initiate another place, even though it is going to cost you an additional point or two. If you purchase again and it does not work out, re-peat the procedure, there’s always a possibility that the stock wasn’t supposed to be or your investigation was slightly faulty. In either situation, learn what you’re doing wrong and right so that you can be ready to use those classes with another inventory.