Sunday, May 25, 2014

My Best Advice for Stock Market Traders

I consider myself an investor, not really a trader, but like a lot of people, I do think I pick a winning trade from time to time.  Unfortunately, since my funds are limited, like everyone, it leads me to sell stocks in order to buy new ones. 

This leads to my worst performance.  I always think that my current holding is not going to as good as my next one.  I sell what I have to chase something else.  Generally, this is usually a bad move.  The stock used to own does just as well or better than the new one I bought. 

Add to that fact that in the process I paid commissions to go in and out of the two positions.  That’s just dumb. 

Comparison to Baseball

I’m a baseball fan, and if there’s one thing I don’t like to see in baseball, it’s overmanaging, particularly when a manager changes relievers repeatedly, multiple times in an inning.  As if the next pitcher is guaranteed to get next guy out.  Like the next pitcher is going to be better than the one that is already in there. 

Sometimes he does the job, sometimes he doesn’t.  In baseball, there’s no way to know how the other guy would have done.  In stocks, we do know.  They continue to trade even if we don’t own them. 

So, a little advice:  STOP TRADING SO MUCH.  Review not only your past trades, but what happens to stocks after you sell them.  You will likely find that you would have been just as well off, or better even with commissions, as if you just held the first stock.

If you feel you have to trade just to do something, then you have another problem.  You aren’t trying to make money; you are trying to fill some other need.  If so, just expect to continue to underperform.  Nothing is going to help that. 

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