Finding Peace in the Market

Many people when just getting into investing, tend to panic when their stocks are going against them. But panicking is the worst thing you could do when trading. Trading requires a rational, logical mind free of emotionality. In episode 12, Brandon and Christine will discuss how you can accomplish this sense of peace in the midst of the market.

Show Notes

• The S&P was up about 0.5%, though it had started out in the negative.
• The positive move was due to news from Gilead Sciences, Inc. (NAS:GILD) that their drug, remdesivir, showed a reduction in mortality rate of 62% (source).

[06:31] – Week in Review

• The S&P was up 1.8% this week, while the NASDAQ was up almost 4%.
• There’s been a significant divergence between the NASDAQ and the other indices, which tends to correct over time.
• My wins this week were XLP (consumer staples ETF), TNA (3X bull ETF), IWM (Russell 2000 ETF).
• I had a loss on U.S. Bancorp (NYS:USB), though by the end of the day my loss was reduced significantly thanks to the rally in financials.

[13:37] – Finding Peace in the Market

“Never be in a hurry; do everything quietly and in a calm spirit. Do not lose your inner peace for anything whatsoever, even if your whole world seems upset.”

Francis de Sales

• If you aren’t able to take emotion out of your trading, then you will make mistakes.
• Never be in a hurry, because there will always be plenty of opportunities. But if you rush into a trade without doing your due diligence, then there is something you could miss which will sabotage you.
• Do everything with quiet and calm, because letting yourself get riled up will just rob the enjoyment from trading. Trading does not need to be an anxiety-inducing activity.
• Don’t panic, even if the whole world is panicking, because only by remaining calm can you hope to find the solution.
• As Warren Buffett has said, “Be fearful when others are greedy, and greedy when others are fearful.”
• In a time like now when everyone is jumping into the market and there is a lot of FOMO, you want to stand back and be cautious before making a move.
• You need to think of losing as just a part of trading. It’s not a failure if you lose: sometimes you follow the strategy to the letter, and still you will have losses.
• No amount of practice will allow you to win 100% of the time. No matter how good you become, you will still tend to lose 10-20% or so of the time.
• Learning to accept these losses as just a part of the process will do much to curb your anxiety and aversion to loss.
• Look at the big picture: your gains over months, quarters, and years. Tune out the day-to-day fluctuation of your portfolio balance.
• Instead of focusing on your balance, focus instead on how each of your positions is doing, whether it needs to be adjusted, rolled out, closed, or left alone.
• All winning strategies will lose from time-to-time. If you just chase one strategy after another, you can never hope to succeed as much as someone who sticks to a handful of winning strategies and follows them to the letter.
• If you are too risk-averse to try something like options, or even picking individual stocks, then put your money into basic index funds or ETFs. You have to know your own risk tolerance.