As a registered investments
advisor and a coach for a prominent online trading education, I get the
opportunity to talk to lots of people about trading. Sometimes I even pick up some new clients who
then divulge their past performance to me.
Obviously, their past trading was not what they wanted it to be. As I look at where they’ve been, I see some
of the same trades I was in or some fundamental smart investments. Then as I look deeper or begin my process of
being a fiduciary for new clients, I see glaring mistakes in investing
101. As we create a portfolio of
investments I hear over and over again ridiculous comments. These comments show me their heads and their
overthinking a trade really cost them some serious cash! Here are some of the red flags to help you
see if maybe your head is getting in the way of your trading?
I know that… This phrase is
normally the kiss of death. This
beginning of a sentence is usually followed by “the stock is going to go up”. Or maybe, “I know that the market is going to
fall tomorrow and continue for the next month”.
Those three words are such a farce.
As soon as traders learn that they don’t know anything the real learning
begins. If the market was that easy to
“know” we’d all be making millions. When
you see yourself trying to outguess the market because you believe you know
something, realize you’re only fooling yourself. Time to step back and re-evaluate where your
I heard… This is usually
followed by some expert’s opinion of the market. Once again, we are blindly putting our faith
in someone we probably never have met or never will get to know. Just because they are on TV or maybe a radio
show doesn’t mean they can see the future.
Yes, the talking heads sound very convincing but that doesn’t mean you
follow them blindly. Do your own
research and see if you come to the same conclusion. Work on disproving the comment you heard or
take a serious look at the other side. Verify
results and maybe even look for an audited or documented track record.
I read… As soon as I hear
those first words, I ask “where did you read that”? I then heard they readi it on the internet
and I have to bite my tongue to keep myself from laughing. Right now there is a commercial that plays on
the TV all the time. The girl ends up
dating a French model who obviously is NOT a French model. The point the commercial is making is that
you can’t trust what is put on the internet.
Anyone can put anything on the internet with absolutely no
verification. Just because someone has
published something on the internet doesn’t make it true or right. There is so much garbage out on the internet
that I wonder sometimes why anyone would go to the internet for research. I am sure there are plenty of reputable sites
but the content won’t be worth a hill of beans.
I don’t like… Really? When was it a prerequisite to have to like a
stock to make you money? Or for that
matter why do you have to like an index, sector, industry, etf, strategy, etc…
to make it a profitable opportunity. Who
cares if you like the equity or not!
Your personal feelings have absolutely no bearing or importance in
making money in the market. Just to let
you know I don’t like nor understand GOOG, NFLX, CMG, or AMZN. I have no idea why they have such a high
stock price? I can’t believe they have
run so bullishly. In fact, I can’t stand
the fact that they are so high and I got out so early at times. I am grateful I have been able to make some
good money following the trend. I may
not like the company, management or even the product they may produce but it
has no bearing on the ability to make money on the equity.
So and so said… The infamous stock tip that
is going to make you millions! Let me
let you in on a little secret. The real
good stock tips we hear are after the money’s been made. It is usually done by a market maker like
Warren Buffett that has enough money to move the equity just by taking a
position. Maybe, by a billionaire whose
comments can run AAPL from $425 to $500 a share? Guess when he got in? Definitely at a much lower price and they
will most likely be out once the “easy money” has been made. Once my uncle’s, brother’s, sister’s, best
friend’s, girlfriend told me AAPL was going to go up. Duh?
Then the secret penny stock was also going to go as high as AAPL. I wonder why it went to zero two months later? Could it be that her information was told to
her by an unknown very important source?
The truth is there are no
market experts. To the best of my
knowledge the traders in the late 1930’s and early 1940’s are not trading in
today’s market. I would dare to say
today’s market is much different than the market after the great
depression. With all this bad news let’s
get happy and let me tell you what works!
We are not in the 2008
volatile trading year. Follow the trend
and make some money. Stocks have moved
significantly this year and you never miss a run up if you are in the equity. When the equity starts to pullback then it is
time to use a protective strategy.
Protective puts, collar trades and in the money covered calls are ways
to make up some of the downward movement.
Next thing you know we could see the stock run back up. We have to take advantage of this once in a
decade run to augment our portfolios.
Our year isn’t over and let me suggest you get in while the get ‘ins