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.
- 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.