Trade The Journey

Trade The Journey

Letting Go!

Top of the Morning. Wow, what a week! I’d say about midweek; I began to notice the GameStop ticker repeatedly appearing on my Twitter feed. People kept mentioning Gamestops’ monumental rise, and still, I paid no attention. Finally, I decided to look at the charts while completing my nightly market review.

Much to my delight, AMC was also included in the euphoria. Luckily, I had been purchasing AMC in anticipation of eventual reopening. AMC received money from the government, and now they are debating issuing shares to capitalize on the extreme optimism.

Current market events result from a perfect storm of excess capital, low barrier to entry with the rise of financial apps, social media, and the disdain for Big Money. The stocks targeted were heavily shorted by hedge funds.

With all the turmoil, many trading firms limited the trading of the most volatile stocks. Some apps only allowed you to sell your shares, which depressed prices. Robinhood faces the most scrutiny for its active role in limiting the trading of shares of Gamestop and the like.

I’m not fully clear on Robinhoods’ explanation, but from what I understand, the increase in trading required them to keep more capital on the books. They secured over a billion dollars from existing investors to shore up holes.

Retail traders are upset that they were not allowed to capitalize on the opportunity. The market sunk, while stocks mentioned on a Reddit forum skyrocketed. Everyone is in the market now.

One poster notified the Reddit forum that he cashed his 401k out and brought as many shares of Gamestop allowed. Reading the stories of young investors profiting from Gamestop’s rise at the age of ten makes me feel inspired and worried.

Please make no mistake about it; this rebound is entirely fueled by easy money and low rates. With the third round of stimulus checks set to be issued, one can only imagine the heights the market may reach. Everyone thinks that stocks can only go higher.

All it takes is a shake in confidence for a correction or crash to wipe out an entire trading account. Apart of me wants to be in on the action and enjoy the good times. However, when greed overtakes, there’s no telling how much you may be willing to risk.

One adage I remember from a Paul Tudor Jones documentary is that you focus on your risk instead of pie in the sky dreams of profits, you can become extremely profitable as a trader. In trading, everything is in reverse.

When greed prevails the market, you should be fearful, and when fear prevails, you should be greedy.

It’s hard to recognize the current market situation without the proper experience and knowledge. I believe the market should be allowed to correct itself without intervention. It’s healthy, and the lessons learned will enable people to become prepared for the next cycle of the market.

I decided to close out the most volatile positions in my portfolio. The only investments that I intend on keeping are renewable energy and established companies with a competitive advantage. I anticipate the market will fall, but I don’t know when.

So either I keep my trades on with the thought of predicting a top, or I close my position early and possibly sell too early. I sold early and freed up money for purchases.

When Baron Rothschilds was asked how he acquired such wealth, he replied, “Selling too early and never buying at the bottom.” Meaning he never tried to pick a top or bottom.

Letting go is hard to process, especially if you’ve become emotionally attached to the stock. I had a few stocks in my portfolio that I purchased near the bottom. I have a knack for identifying great companies.

I felt good looking at my profits on a daily basis; it served as positive reinforcement. “I am trader evidenced by the profits earned. Need evidence? Look at my screen.”

It’s dangerous to become attached to stocks; you lose your objectivity. When I thinking about selling out of a position, I feel a sense of loss. It’s almost as if I fail to recognize that you can purchase the stock again.

What if I purchase the stock at a higher price than I originally bought when trying to renter?
What if I end up in a losing position?
What if the stock continues to rise and I lose out on profits by exiting too early?

I can assure you that you will do all three and perhaps more. Trading is a continuing learning process and fight against your human nature. As I grow as a trader, I realize how vital journaling has become for me. I learn about myself through writing down my thoughts.

For you, it may be different.

Over time, you will learn your tendencies and how to guard against them. Trading will force you to release control and, in turn, let go so that you may stay in the game mentally and financially.

Staying in the game is the only way to profit over time. As Mr. Jones said, think of your risk first and foremost.

My recommendation: If you must take a chance in this volatile market, set aside an amount you are willing to lose. With attention centered on a few stocks, other valuable stocks will be selling at discount. Beware of the volatility and keep an open mind towards the perpetual bears on the market. Above all, make sure to keep your attention on great companies flying under the radar.

This past week:

This past week was rough for several reasons. It was exhaustive both mentally and spiritually. I tend to spend money in times like these to avoid my feelings. This week I did a little better handling disappointments. Instead of reverting to my vices, my new outlet has become trading and working on my craft.

I’m happy to have found my passion, and I hope to continue to hone it. I’ve continued to eat at home and avoid fast food. I’m watching my spending to avoid falling into old traps.

I’m also learning more about cryptocurrency.

This past week deserves the grade of “C+.”

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