I really HATE when you buy a security whether an ETF or a good stock and it drops 5% or more within a day or two. How do you guys deal with the psychology behind investing? I am very OCD and can be neurotic about money so i am really not an ideal candidate for managing my own money but i would still rather stay on top of it myself then pay some moron a percentage to essentially do nothing
Thinking about this myself after a couple of unpleasant surprise falls in share prices and a couple of conclusions I can offer -
1. stocks are too volatile, trade forex - number of falls of 5% or more per day in largest UK stock, Shell, in the 2000's = 31: 5% drops per day in largest forex pair, EUR/USD = 0
2. if you must trade stocks, don't buy the shares, spreadbet the stock but pay for protection of a guaranteed stop-loss at an acceptable level below your current price
3. if you're investing in stocks for long-term growth and/or dividend, buy the shares and don't worry about a 5% fall, regard it as an opportunity to buy more
4. prices sometme spike upwards too, so make sure you can capture that exposure to good luck, by good price monitoring and maybe by removing limit orders - number of rises of 5% or more per day in largest UK stock, Shell, in the 2000's = 29.
1. stocks are too volatile, trade forex - number of falls of 5% or more per day in largest UK stock, Shell, in the 2000's = 31: 5% drops per day in largest forex pair, EUR/USD = 0
2. if you must trade stocks, don't buy the shares, spreadbet the stock but pay for protection of a guaranteed stop-loss at an acceptable level below your current price
3. if you're investing in stocks for long-term growth and/or dividend, buy the shares and don't worry about a 5% fall, regard it as an opportunity to buy more
4. prices sometme spike upwards too, so make sure you can capture that exposure to good luck, by good price monitoring and maybe by removing limit orders - number of rises of 5% or more per day in largest UK stock, Shell, in the 2000's = 29.
M
malaguti
sods law really..I only trade stocks these days and I will mostly buy the shares
Its not for long term growth, but I may hold for the long term, all depends whether my stop is hit. But my stop is large. 5% is nothing,
You will find though that buying when the overall market is just breaking out helps. with your stock showing good relative strength, and good volume and then couple all that with a strong sector. Then there is an art to choosing the right stock showing good trending characteristics
You will be on the right side more often than not for sure with this combination
certainly works for me
counter_violent
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Diversification is key.
If you purchase only one stock and it drops 5%, then obviously you are down 5%.
If you purchase 20 stocks equally and one drops 5% then you are only down by 0.25% overall.
But stock purchase isn't really about capital appreciation in the short term, it's more about dividends, reinvestment and growth over the longer term.
lawrence-lugar
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I was like you too...when I was beginning to trade. -- I would get so stressed easily at the thought of losing money
...that I see some of my hair on my desk.
But generally though...a good trader shouldn't get that stressed...because they have logical expectations and risks planned ahead. You don't enter a battle by just winging it hoping for the best.
...that I see some of my hair on my desk.But generally though...a good trader shouldn't get that stressed...because they have logical expectations and risks planned ahead. You don't enter a battle by just winging it hoping for the best.
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