This is one of the biggest lessons I have been learning the hard way for the past few years. Even though I can talk a lot about this strategy, it is really very hard to grab profits from the market if our portfolio is positive. I don't know about others but my mind always says that I should wait for some more time to grab a bigger profit.
But most of the time what happens is that I end up losing even the positive value that I would have seen. I have had instances where my portfolio reaches a positive value and I wait for some more time and the value drops back again. But this time when it drops it goes below my bought price making me a long term holder waiting for another opportunity.
Not all long term holders intend to be one
Most of the time stockholders become a long term holder because they end up becoming one because their portfolio value drops below the bought price. This has happened to me as well. For the past 3 years, I have been waiting for my stocks to at least show some little positive sign or at least reach somewhere near the bought price so that I can sell them and look forward to investing in something better.
It is a huge mistake that I made by not having a proper stop loss plan. Now I have reached a threshold where there is no point in selling my stocks. For some of the stocks, I have left them to decay there. If some miracle happens in the course of another two years, I would be happy to sell my stocks at least for the bought price.
Grabbing the profit is a skill
When we see some good profit, greed is the first thing that covers our eyes. Most of us would wait for the value to go even higher. It just creates a FOMO where what if we miss a big opportunity by grabbing a very little profit. This ideology has actually made many people lose their money.
I got great advice from a friend's mother. She is one of the most successful traders that I have seen. Her strategy would be to invest in a particular stock and wait for the stock to give a minimum of 5% profit and if that happens sell that stock. She will never care even if the price of the stock goes beyond 50% or 100%. She always says that we shouldn't have so much greed while booking the profit.
Especially when we do a day trading, if we see a good number as a profit, we have to book that profit. Anything can happen in day trading. Sometimes greed makes us wait till the end of the day and make us lose even the little profit that we would have seen during the middle of the day. Grabbing the profit is definitely a skill. It requires proper planning and observing the market frequently.
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The crypto market behaviour is very emotional. People tend to get greedy when the market is rising which results in FOMO. I also think this has to do with experience. A young trader just starting out could have difficulty in accepting that s/he should not be attached to a project (either for long term or flipping). I was one of the those people that dumped their $Links recently, I swapped it to BTC on Changenow and moved on. It still got higher after then but I didn't regret it. You never lose once you made profit and that has always been how I think.
Great post, I should share with amateur traders.
Thank you so much for your valuable comments. Cheers !BEER
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BEER.Greed is one thing that affect many traders. My previous boss used to tell me- never wait till you regret. Pick the little you can get.
I have had many experiences and I know greed is traders killer.
Yes well said. If we keep looking for big, we might miss even the small profit that we see in front of our eyes.
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Great. That's nice. 👌
I have never had an appetite for trading, at least not intentionally. The wins I have had were by accident, not method.
However, I have read and studied how successful traders work. They often look for an entry point and an exit point on a trade before they buy it. They also calculate how much loss they are willing to accept before getting out of a position.
In other words, once they've done the homework, they trade. The rest is automatic. No watching. No emotion. They can walk away and know that they either made a good profit or lost very little when they return to their desk.
Poker is the same. Players will minimize losses and go for big wins. Losses are a part of the game, so they need to be budgeted.
This is why you see people only risking 2% of their money. If they lose, several times, they are still in the game. But, when they win, it's worthwhile. Money management is extremely important to stay in the game long-term.
It's amazing to watch how the pros do it. I admire them greatly.
Even in other investments, you need to be able to call you entry point, exit point, and how long you will stay invested. This is what distinguishes investors from speculators. Investors want their money back with earnings by a certain time so that they can move on to the next investment. Speculators have an open-ended profit and timeline.
Your friend's Mom is right. Hit the target and run to the next trade. There is never any shame in taking profit.
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Wow thank you for a detailed reply. Even if you don't have a good appetite your words are wise. Sometimes an accidental trader is more profitable than an experienced trader. 😉
!BEER Cheers!
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