Question:
I keep missing the big swings. I missed the bulk of the move up from March and, not surprisingly, I decided to go long last week in spite of the ridiculous valuations of some of these stocks and, of course, the market reverses after the FOMC rate decision on Wednesday. Fantastic, don’t you think?
Alex from Miss-the-boatville
Answer:
Alex, actually, I wouldn’t use the word “fantastic” to describe your issue. I would, however, use the word “common” to describe the situation that every trader on the planet and in the history of the world I imagine has experienced.
Trader frustration drips from every word in your lament. Are you a day trader or a swing trader? If you are the latter, and you still own the long shares just bought last week, consider holding on for a bit more time, assuming the stocks are fundamentally sound. In my opinion, the “bull” rally we now have should hold on through the end of the year, and the downward move of last week was some well-deserved rest from the heated rally and some profit taking to improve ROI for institutional investors.
If you are a day trader, and you already bought and sold at a loss, I would offer this advice. Consider trading for the short term, as opposed to “on a day basis”. By “short term” I mean anywhere from one day to three months. This type of trading helps reduce frustration because the pressure to buy and sell lessens dramatically. You can take your time on both ends of the deal, which gives you more mental space to see the bigger picture, and as I have said before, the big picture is so critical to short-term trading in the markets. For example, lots of traders are riding gains in GE today because they bought it when it broke the technical barrier of $15 in mid September. Okay, but why hold it? Well, the thinking is this stock still has a ways to go because the big picture is looking good for a continued rally and a stock such as GE should do well if the market continues to move upward.
I guess what I am sensing in your frustration is a lack of seeing the big picture. Consider backing off for a bit from trading to train yourself to see the big picture. Add to your information sources, balancing the bulls and the bears. Throw yourself into some dry facts and figures regarding the economy. Watch the flow of institutional money. Watch the bellwether stocks, such as Caterpillar, and pay attention to what is happening outside the U.S. If you follow these general guidelines, you will soon find yourself immersed in the minutiae of detail, which, ironically, will give you a better view of the big picture.
Trade in the day; invest in your life …
