You said: "You touch on something that I believe is significant: conviction. It's easy enough to make mistakes and lose money in the market, but losing one's conviction is a sure fire way of blowing it IMO. It's difficult to hold a play that's going in the wrong direction, especially when the caution flags are out, but I think it's important to realize that timing a play is less important than determining the eventual direction of the stock."
Excellent point, about the necessity of having conviction. Earlier this year, I was watching NTAP go down, down, down. I liked the company, but thought the stock was absurdly overvalued. So, while I waited for the market to come it's senses and bring NTAP down to a reasonable price, I tried to make some money on the Dark Side. On two or three separate occasions, I bought NTAP puts.
I chose the right stock, and I was right about the direction the stock was going in. But I didn't have conviction. This is a very volatile stock, and I got scared into selling my puts, with small losses or small gains. I never had the conviction, to ignore all the daily volatility (which, in this stock, is often 15% or more). I didn't have the conviction to wait patiently, and hold till the stock was setting new yearly lows. So I didn't make money on NTAP puts.
I know, when I am building long positions, I have the conviction to hold and buy more, even when the stock goes a lot lower. Repeatedly, I have begun building a position, and watched the stock get chopped in half from where I started buying it, and never considered selling. Somehow, it's different, going long vs. short, for me. |
