To stay long or not to stay long?

By TheWild1 at 10 October, 2007, 6:38 pm, Categories : Financial Markets

That is the question.

If you haven’t figured out yet, I am not a day trader. A better term to describe me would probably be a month trader. I also try to invest all my money in many different places aside from just the regular financial markets. Its not that I don’t have time to constantly watch the stocks all day (I have plenty of time), but I much rather prefer watching my investments go through its course. I like to know that my money is making money on its own. Plus its really fun when time comes to reinvest and I get to play around with lots of money; however there are other reasons I tend to not be day trader.

On numerous occasions I have tried to plan what I am going to buy or watch during market hours and, when time comes to pull the trigger, I have no problem buying a stock, but my problem comes when its time to sell. To put it simple, I have difficulty doing it. I have read numerous blogs, sites, or whatever about day traders who bought and sold stocks within minutes of each other. I have tried to do that many times, but again and again it becomes difficult for me to accomplish.

Why is it so hard to let go?

Many times I have tried to diagnose my “illness,” and I have come to some conclusions to why I have such difficulty buying and selling stocks within minutes of each other:

Emotional attachment: A big “DO NOT” in the world of investing, and, yes, I quickly scratched that off the list. Why would I feel attached? The stock doesn’t care about me. If it is between me or my money, I’m sorry but the stock has got to go. However, there is one stock I would feel attached to… TheWildinvestor (TWI)… A man can dream!

Don’t like to lose: This comes into play when a stock I invest in starts to go down from the beginning. Lot of traders (all kinds) like to adapt a method of automatically putting loss stop right after a purchase. Meaning that, after buying stock X, the buyer will setup a stop for a certain amount of loss (you can also do it for a gain). It can be a percentage or actual points. They do this so they can cover their investment if the stock suddenly goes bad. On the other hand, there are investors who are against this method. I am one of them (maybe that is not a characteristic of a day trader), but I like to give people or even stocks a fair chance. Who knows if the stock will keep going down, but then again who knows if it will rebound back up. In my head I feel I put my money in this stock for a reason, so lets stay with it. As an entrepreneur/investor risk is part of everyday life. You have to live or die by your choices.

See it has a chance to increase my position: Many times I might even increase my position in the stock. An example I did this with was EMC Corp. (EMC). Back when VMWare (VMW) IPO was coming out I had bought some shares of EMC at about 19, but then the stock started to go down, and eventually I had bought some more at $17. Now the stock is breaking out above $22. Granted day traders probably don’t want to wait a month and a half, but something in my head just doesn’t let me sell it. Yet, because I didn’t sell it at first sign of loss, I ended up making a profit. I can’t accept a failure (loss), and I sometimes I end up turning a stock into more of a long term investment. It is also key to not that I do have other investments going on at the same time, so I am not just stuck on one stock holding me back.

I also know many day traders who react too quickly and when they first see red (loss) something automatically triggers inside of them to sell, but then 2 hours later the stock ended up in green (gain). I will be the first person to tell you that I have very little patience, but for some reason when it come to stocks I suddenly have the most patience in the world.

Now of course if a stock ends up going down a couple of points I would probably get rid of the stock, but after a couple years of investing, that has yet to happen to me (knock on wood).