Some Thoughts
insider review:
emotional extremes. You ever see someone playing a
game of Poker, and now matter how long you watch you never once see that person crack a smile, twitch a facial muscle, or even slightly change their posture while at the table? Sure you have and while you were watching them, they were watching everyone else at the table preying on any sign of
emotional weakness. They were probably doing very well in the game also.
Well that "emotional rock" needs to be you. When investing you need to put fear, greed, and loyalty aside. The best way to start is to sit down and have a preset plan of what you want to do with your portfolio. These are your ground-rules and you want to stick by them. They should define the
guidelines for stock picking, research criteria's, buy and sell rules, and anything else that pertains to your daily strategy.
Before each day review your portfolio and think about what you will do in the event certain situations arise.
Mentally prepare yourself to make decisions based, not on your emotions at the time, but on your set program and strategy. When do you cut your losses? At what point will a stock be a buy or a sell? What if the market turns against you? At what point do you want to take profits? Make these
decisions BEFORE the roller coaster ride starts, not during it when your heart is pumping and your brain is frazzled.
Once the "high" of the markets buzz sets in, most novice investors get caught holding stocks they should have sold and buying stocks that have already topped off or vice- versa.
How many times have you seen a panic set off a sell-off on a stock only to create a buying opportunity for the smart investor? These are the times the professional makes his or her money! They sit back and stay emotionless and see the situation for what it is. They use cold facts like Charts and Technical Analysis to make their decisions rather than fall into the trap of the markets temporary sentiment.
The panic is created by fear and the smart investor is not afraid, in fact he is about to show you how fearless he is by making a pile of money on other peoples emotions. Then there is greed. Maybe the worst enemy of an investor. Seeing a stock go up to new highs, getting caught up in talk of
news and great earnings or contracts, the greed filled investor never thinks his stock will stop climbing and continues to hold despite the warnings. There are very few CSCO's and BVSN's out there. In fact the majority of stocks don't handle gravity very well.
Follow your program and don't get caught watching profits slip away with the euphoria of the false promise of another run. The last subject is loyalty. Oh baby! I bought you, I love you, and I am yours forever! Puuuuleeese! Stocks are like that first pretty girl that talked to you in junior high, she was the babe of babes until that brunette decided to say hi to you after lunch. Now you can't even remember her name. (The opposite works for our female readers :) ).
Same thing with a stock. The market is filled with beautiful plays so don't attach yourself permanently to a stock without good reason. They won't rub your back or keep your feet warm at night so stay away from the alter.
And above all stick with your plan. |
