XAO (ASX) Short Term Trading Weekend Lounge: 23-25th Feb

Originally posted by gra490 ↑

Morning all, I have a question that I think will be very hard to answer. How many trades per week or month do you regular traders do? My reason for asking is I have this FOMO and tend to hang on to a stock hoping it will go up. It may not go down, it may not lose any value, it may not go up in value, but I do not free up any cash and miss out on possibles such as JAT which I looked at Thursday. I need to learn to cut the strings, suck it in and trade more often. I have all day to do it but just sit there too scared to press the sell just in case then watch what I may have bought go up, and what I should of sold just sit there. Your thoughts appreciated.

Expand

Hi gra490,
In my experience, FOMO sucks. It is one of the absolute worst traits an investor or a trader can have. It’s amateurism at its most damaging. When we practice it we give in to our emotions, no different to sitting in front of a pokie machine hoping for the next payoff.

You have to be strong in this game, a killer if you’re dabbling in the (let’s say) exotic end of the market. Cut the branch that doesn’t bear fruit. We only get so much time to build our nest eggs, the opportunity costs of holding non performing stocks can not be understated.

Starting with very little, I understand FOMO well. We put ourselves under a lot of pressure to strike it rich... and quickly. We read of others making a killing, but the multitudes who fail just disappear never to be heard of again.

Now, I watched the markets for the best part of 20yrs, then took over my Super about 4.5yrs ago. I made a shite load of trades in the early days, I was the FOMO king. Then, one day I looked back and it dawned on me, the money I made came from just a handful of investments. They happened to be the stocks I knew best, the stocks with great track records, or excellent management - high commitment trades, big investments (relatively) and bought cheap.

With the US bull run at mature level and increased volatility it’s so important that you streamline your holdings. Hold only the best of your picks, the rest in cash. Up until a couple of months back I couldn’t even bring myself to hold cash. I wanted to be fully invested, all the time. That’s how desperate I was to grow my portfolio. Now, I’m 50% cash, I’ve cut all the loose ends out of my Portfolio and, honestly, I’ve never felt more powerful in this market. I’m well on top of all my holdings in terms of research and news and I’m ready to pounce if the markets take a decent hit.

All this doesn’t mean we can’t play the penny stocks or jump on a popular theme. It just means we are in control. We do our research, we control our exposure and the risk, we get in and out earlier. Maybe even the odd impulse buy can be made but if it doesn’t play out, cut it loose.

Just to finish on a cliche, I believe both Warren Buffett and Peter Lynch are on record as stating the retail investor need (potentially) only hold a handful of investments in their lifetime to achieve considerable wealth.

This here is Buffett at his best imo. Baseball analogy from 1min20sec is spot on: