Wednesday, October 8, 2008

Classic Mistake - Turning a Trade into an investment

I did the classically wrong thing and I will now continue to do it.  I turned a trade into an investment.  As I've written in  my previous post, I decided to go long the market, and specifically the financial, expecting their to be a bounce.  No such bounce has shown up and I never closed out my positions.  This has put me in a precarious position of either taking a loss, which would be substantial at this point, or holding on to it for the longer term.

Here is the thing, both of them are essentially indexes.  Both of them will eventually recover, I have no doubt about that.  The problem becomes, how far can you go down before it gets too painful? Lucky for me, I tend to have a very high pain threshold.  Too high actually, so long as I don't watch the stock everyday.  I've taken a few stocks all the way down 90%, which is a complete mistake.  You should have a tight stop on individual stocks, and know when to get out.

So I will, for now, sit and wait for the eventual and violent trend up.  It will happen, of that I have little doubt.  I'm not saying I'm long term bullish on the market right now, but I am short term.  After this much selling, there is almost always a bounce.


  1. I'd just stick to the quality, long-term investments and avoid checking the stock markets every day. Check once a week, but don't over analyze. Just look and walk away, knowing that you have good, quality stocks. You will save yourself a lot of anxiety and a potential ulcer.

  2. This volatile environment can cause a healthy, young man to develop heart palpitations. Don't do that to yourself.

  3. Yeah, i agree. In fact, I'm about to write my next blog post about this.