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How to play the game

Blog - How to play the game


Bag Holding

Gucci Bag.jpg

The stock market’s a completely unforgiving place, and sometimes it will question our very existence.

I think those of us that have had the mis-fortune to hold on to stocks longer than we would like, understand the difficult decisions we’re often presented with, and sometime’s they’re incredibly ugly decisions that will provide us our biggest lessons, and usually it’s from these lessons we have our “never again” moment…. which is often the best lesson (although, I know it’s a VERY tough lesson) we will get for our stock trading future. EVERY trader gets this moment at some point.

How many of you might be Bag Holding positions at the moment and wishing you had some structure to your Trading?

The great Adam Robinson (who contributed to my blog a few months ago) - said it best

“So when I hear sophisticated investors or financial commentators say, for example, that it makes no sense how energy stocks keep going lower, I know that energy stocks have a lot lower to go. Because all those investors are on the wrong side of the trade, in denial, probably doubling down on their original decision to buy energy stocks. Eventually they will throw in the towel and have to sell those energy stocks, driving prices lower still”

Market Psychology is very real, stocks will always drop much further than you think is possible, and when we start to see companies (who perhaps traded much higher in the past) start to fall apart with the Stock Price… at what point do you ask.

  1. I got this badly wrong, what’s my true pain point, and where will I exit?

  2. Will I take a long term Investing mind set and never sell?

  3. Do I cut my losses and say never again, and learn a disciplined approach?

This is probably the worst place to be for a Trader / Investor, because quite often there are stocks that never recover (I’ve touched on this in previous articles so I won’t labor the point too much)… and when we start to observe stocks produce weak earnings / guidance etc, it doesn’t bode well.

I think the stocks I receive the highest number of emails / msgs about are APPLE & NVIDIA, so let’s take those as the example.

Those that follow me SUPER closely know I’ve been bearish on NVIDIA since $290 and it started to make my stock analysis at $240 as a fantastic short opportunity, but rather than gloat about Technical Analysis and how I apply it, I think it’s important to understand for those that are in the sticky predicament of holding the position at the moment, and those that are choosing the long term investing mindset route, the drop 2 days ago was about as welcome as the dog taking a big shit on the nice new cream carpet.

2019 has been lovely so far, and naturally, buy positions have been the order of the day, something my client base are profiting from well at the moment, and I’m getting a lot of questions asking if I’m still bearish on the market… and the response to that question is - I’m flexible (like we all should be)… but hopefully the trades to my client group give you an idea of where I’m at.

2019 has started exactly where 2018 left off .

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That drop 15% drop was a result of exactly what Adam Robinson talked about above… investors / traders taking the opportunity to salvage what they can, which triggered a stop loss massacre, and before you know it… more tears on Wall Street.

The sad truth is, some stocks never make it back… so what’s your pain point?

The long term investing strategy which Warren Buffett preaches, whilst had its place in the world when blue chip stocks traded at $0.50, is (in my opinion) a little outdated and downright dangerous, and the reason it’s dangerous is precisely for the mental health of those that are holding ill-disciplined positions… and please don’t get me started on the ridiculous concept of “dollar down cost averaging” - or as I also like to call it…. adding to a losing position (which is completely absurd).

When we get it wrong… it’s actually very simple.. we should have a clearly defined trade with exits in place PRIOR to taking the position, I think most of us understand this, so why does our ego get in the way?

My take on the mindset of long term investing is pretty well documented, (in my opinion) it’s for dividend hunting and providing a nice bonus to an already good income.

Sound Technical Skills / Discipline / Rules / and a well formulated Trading Plan are my chosen methods for navigating the Financial Markets, and as I begin my journey toward my CMT designation next month (Chartered Market Technician for those that don’t know) of which there are only 4,000 in the world… I look forward to sharing much more insight with my client base / group in the coming 12 months as well as providing a bit more insight via my blogs / charts and ultimately more profit.

I hope everyone is well out there, and if you’re NOT well and you’d like to make some changes to you approach… Click the button below to start a new path.

Are you sick of gambling Vegas odds?

Sam McCallumComment