Originally published by Chamber of Merchants
Struggling to Buy Stocks, Unable to Pull the Trigger
[this is one of many, many problems I had to overcome but let’s focus on only one problem for this post]
So the problem here was that I wanted to make so sure that I was right, that I could barely click the “buy” button when I had selected a particular share. In fact, the market had to twist my arm with booming prices in order for me to have the confidence to enter the trade. In previous articles I have mentioned the flaw of following price as a leader: As a novice trader, I always expected today’s trend to continue tomorrow. Then when tomorrow came, I would expect the same thing.
You see my old way of thinking? I though in straight lines: shares go up in straight lines. If the stock is up today, then it will be up tomorrow etc. This was my thought process, even though, had I looked, I would have seen that virtually no such graphs existed. It was all in my imagination.
So when I finally was convinced, after hours and days of deliberation, to enter a “winning trade”, I would pull the trigger and welcome the chaos of doubt and fear into my frail and ignorant head.
Where I went to school as a younger version of myself, we were privy to three waterfalls as our school grounds were established on a nature reserve. I distinctly remember the feeling of my feet leaving the cliff edge, as my body ensued a nine metre plunge into the depths of water below.
When I used to enter a trade, I would experience the same, adrenaline pumped and helpless feeling, hoping that my profit and loss statement would report back a soft landing.
The entire process used to be a traumatic experience as I hurled myself into the abyss of the unknown. After convincing myself about a particular company, enduring stress, restlessness, sleeplessness and doubt I would finally and ultimately buy the shares.
So, after all of that trauma I had placed myself through, based on a single purchase of share, how easy do you think it was for me sell the friggin’ things?
Nigh impossible.
Difficult to Sell.
You see, after being so very convinced that I had chosen the correct company to “invest” in, how could I possibly exit a trade when I was on the winning end. My thoughts would circle faster and faster, saying, “you did it, you picked a winner!”
Do you sell a winner? My younger and less wrinkled self would snap back, “No! Do you know how hard it was pick this one?”
Of course, that winner would lose its gains and later become a loser. Then it was even more difficult, because as I watched the decline in price, which should have forced me to sell, since price was the reason for entering, I would instead think,
“This is still a winner, nothing has changed. The market just doesn’t realise what the true value is.”
Probably the epitaph on the tombstones of many a wannabe traders.
I found it extremely hard to realise what was actually happening. Only much later could I recognise that my inability to sell was a direct product of my misguided reasons for buying. Hence, a component of the Merchant method was born.
I share it freely with you: “a Merchant does not invest in a company. A Merchant invests in a trade.”
Once I realised that I need to invest in a process, rather than a company, it became exceedingly easier for me to enter and exit positions.
Conclusion
If you practically need to have your arm twisted off to finally enter a trade, then it will be equally , if not much more, difficult to exit the trade in an effort to avoid the same amount of stress and trauma. However, holding on to a losing trade, will result in a much more stress, lower self-esteem and probably failure as a trader.
This week we have a few international events going down such as the ECB President Draghi’s speech on Tuesday, Europe’s interest Decision and Manufacturing Numbers from the U.S.A.
The EUR/USD may bounce back, which will probably speed up the decline in the U.S Dollar. I’m expecting Gold to do big things this week. Remember, Gold is oversold. As I said in the Weekend Report, I’m not interested in selling my positions until Gold becomes overbought, and Gold always, always, always becomes overbought. In this case I expect it to become overbought and to reach, if not break into, new highs at $1370+ minimum.
See you around the ASX.