AI
THE BASICS of PORTFOLIO BUILDING:
After completing your due diligence on a company you’ve just bought. Your jazzed and ready to watch your stock take off. You should know that some will rise, some will fall and some will become duds. None of them will hold the same equilibrium. In fact they will all be different. They will each have a different personality just like your kids. The best way to learn their personality is to study the charts. Charts give the best insight about your stocks personality. Watch and wait. Patience, Patience, Patience. That may be your best and most valuable lesson.
Some stocks you may hold for over a year before they do anything. Others will bounce and rally immediately. Think about when you are going to sell early on, while doing your due diligence, ask yourself, how long do I want to keep this stock? You might even consider not buying the stock until you know how long you want to be invested? Don’t expect all your stocks to go up and down at the same time. If there is a market correction, the stocks may remain down for a year to 18 months. The market does what the market does. If you have beginners luck, don’t get a big head thinking your God’s gift at picking stocks. Keep a level head and do not invest more money than you can afford to lose. Watch out and don't get overextended. If you can’t sleep at night, then most likely you’ve bitten off more than you can chew. Then, what are you going to do to reduce your risk. Maybe you have to sell? Some people sell at a loss and think nothing of it. Other’s say never sell at a loss, no matter what. It’s your decision.
Figure out your tax bracket and decide whether you need to hold for short or long-term capital gains. That's another way to decide when to sell. If a stock goes up right after you buy it, are you going to sell it? or Are you going to keep it? You have to decide, can I do better by waiting or should I sell and take the profit now?
Make a plan and don’t miss a trade just because you didn’t know what to do. Do enough DD to know what your options are. Draft several scenarios so you feel confident with your decisions. It's difficult to decide on the day of the trade. Why, because the brain may experience sensory overload. Having to make a decision that involves money really turns the pressure valve up. I certainly don't want to make a bad decision and lose money. Many people experience nervousness like they have never experienced before. Some hit a wall just like a marathon runner who “hits the wall” at 25 miles into the race with only one mile to the finish line. For some when they hit the wall, they will never see the finish line, at least not that day.
If you want to know more about why this happens, there is a book you can read to understand why we have what I call brain freeze. Read, Change your Brain Change Your Life by Dr. Amen. Here’s the expert’s viewpoint:
Change Your Brain, Change Your Life: The Breakthrough Program for Conquering Anxiety, Depression, Obsessiveness, Anger, and Impulsiveness.
Basically, from a layman’s viewpoint, there is a natural chemical reaction that when released in the body over stimulates the brain. In highly stressful situations, there is a fight or flight sensation that occurs. The body and the brain have trouble going in the same direction at the same time. In simple terms the body and mind overloads the memory and judgements centers of the brain. Call it a log jam, brain freeze or sensory overload. At that moment one becomes physically and mentally impaired. Some people experience this when they take exams. Dr. Amen has all the technical jargon to explain what occurs.
What’s this got to do with stock trading? I'm just giving you a heads up since I've talked some other traders who have already had this experience. If you get involved in a fast trade, watch yourself and see how well you perform under pressure. You may handle the situation just fine. It's something good to know about because our human behavior acts differently when there is money at stake.
After completing your due diligence on a company you’ve just bought. Your jazzed and ready to watch your stock take off. You should know that some will rise, some will fall and some will become duds. None of them will hold the same equilibrium. In fact they will all be different. They will each have a different personality just like your kids. The best way to learn their personality is to study the charts. Charts give the best insight about your stocks personality. Watch and wait. Patience, Patience, Patience. That may be your best and most valuable lesson.
Some stocks you may hold for over a year before they do anything. Others will bounce and rally immediately. Think about when you are going to sell early on, while doing your due diligence, ask yourself, how long do I want to keep this stock? You might even consider not buying the stock until you know how long you want to be invested? Don’t expect all your stocks to go up and down at the same time. If there is a market correction, the stocks may remain down for a year to 18 months. The market does what the market does. If you have beginners luck, don’t get a big head thinking your God’s gift at picking stocks. Keep a level head and do not invest more money than you can afford to lose. Watch out and don't get overextended. If you can’t sleep at night, then most likely you’ve bitten off more than you can chew. Then, what are you going to do to reduce your risk. Maybe you have to sell? Some people sell at a loss and think nothing of it. Other’s say never sell at a loss, no matter what. It’s your decision.
Figure out your tax bracket and decide whether you need to hold for short or long-term capital gains. That's another way to decide when to sell. If a stock goes up right after you buy it, are you going to sell it? or Are you going to keep it? You have to decide, can I do better by waiting or should I sell and take the profit now?
Make a plan and don’t miss a trade just because you didn’t know what to do. Do enough DD to know what your options are. Draft several scenarios so you feel confident with your decisions. It's difficult to decide on the day of the trade. Why, because the brain may experience sensory overload. Having to make a decision that involves money really turns the pressure valve up. I certainly don't want to make a bad decision and lose money. Many people experience nervousness like they have never experienced before. Some hit a wall just like a marathon runner who “hits the wall” at 25 miles into the race with only one mile to the finish line. For some when they hit the wall, they will never see the finish line, at least not that day.
If you want to know more about why this happens, there is a book you can read to understand why we have what I call brain freeze. Read, Change your Brain Change Your Life by Dr. Amen. Here’s the expert’s viewpoint:
Change Your Brain, Change Your Life: The Breakthrough Program for Conquering Anxiety, Depression, Obsessiveness, Anger, and Impulsiveness.
Basically, from a layman’s viewpoint, there is a natural chemical reaction that when released in the body over stimulates the brain. In highly stressful situations, there is a fight or flight sensation that occurs. The body and the brain have trouble going in the same direction at the same time. In simple terms the body and mind overloads the memory and judgements centers of the brain. Call it a log jam, brain freeze or sensory overload. At that moment one becomes physically and mentally impaired. Some people experience this when they take exams. Dr. Amen has all the technical jargon to explain what occurs.
What’s this got to do with stock trading? I'm just giving you a heads up since I've talked some other traders who have already had this experience. If you get involved in a fast trade, watch yourself and see how well you perform under pressure. You may handle the situation just fine. It's something good to know about because our human behavior acts differently when there is money at stake.
Beware Bull's Ready to Run - Before investing $ do your own dd. All posts are my opinion.
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