Emotional Trading Will Kill You 89.49% Of The Time

Okay, so I made the percentage up, but I am sure the actual number is not far off. Emotional trading is basically the idea of falling in love or feeling complete hatred for a stock that any trades for that specific entity is based on some idea within you head. You become blinded by actual technical and/or fundamental analysis and feel the stock price will do something based on how you feel about the company… obviously the “falling in love” aspect will hurt you more than hatred.

The usual synopsis behind emotional trading is a somebody who finds Stock A and originally loves its technicals and/or fundamentals. Eventually the stock makes its move; however, the trader falls in love with the stock so much that when the stock starts to head lower you believe in your head that there is no way this stock cannot head higher… even if the numbers and facts say something else.

Regardless of how experienced you might be, everybody falls guilty to emotional trading every now and then. It is in our DNA. My most documented emotional trading came a couple years back when I traded Starbucks (SBUX).

Now it seems that I may have met my next emotional trade…

When I first brought Clearwire (CLWR) on the scene it was just sitting at $5.50 and ready to make the jump passed the 200 simple moving average. In the few weeks following, Clearwire easily moving up a little more than 3 points to $8.85 and we were all rolling in money…

In the few days following that high of $8.85, which should have easily been seen as a selling point (see 3 month chart below), the company reported less than stellar numbers and the stock has dipped all the way down into the mid 6′s.

Now in all fairness this is a long-term pick, so calling the “text-book” move over may be a little premature; nonetheless, the charts do not help any…

First, looking at a 3 month time frame we can see that the current trend has been broken and the RSI dipped below 50, which is a bearish signal.

When we expand our time frame out to 2 years you can see that the stock has been rejected by the 38% Fibonacci level, and on its way downward.

I am not a huge fundamentals guy, but throwing on the fact that they reported a loss and the Wimax movement is moving slower than originally expected, who knows how long it will be before that value is seen with stocks like Clearwire.

All this being said, I am still holding on to Clearwire?

I am afraid to say its true. Will I be another victim of emotional trading? Maybe, but at least I went down swinging… or at least preying.

Side note: If stock dips below 200 SMA, then I will sell my positions… hopefully!

Check out a free trend analysis of for Clearwire.