Buy or Sell. That's the question
When do you buy? When do you sell? Why buy and why sell? It might sound silly 🤔 but they are the fundamentally most important questions before we even decide to enter a trade. How often have we entered a trade only to regret (especially when it goes straight down)? How often have we sold only for the counters of interest to shoot right up? Finally, how often do we enter a trade we have no idea about, just because somebody else did that?
These questions are essential at all times. They are especially important now with the market at one of the most sensitive and insecure times.
Obviously, everyone's financial circumstances are different. I can't address every one of them. In fact, since I am not a financial advisor, I have no intention to address any of them. That's not the purpose of this post. The purpose is to address some fundamental issues regarding mentality behind our trades. I will call them behaviour and expectations.
Ideally, before we enter a buy order, we know what we are doing... Or what we are buying. It's like shopping for a bag. If it's a Prada bag 🛍️, we probably trust the brand and the prestige that goes with it. We know that this bag is going to last as it comes with a lifetime warranty (oh yes! You can get it cleaned up for free at a Prada shop as and when you need to). So, if we enter a trade, we should be in the right frame of mind when to sell (or never, meaning Holding On for Dear Life (HODL)).
There has to be a plan for every trades we enter. Meaning no impulse buying or selling. The plan would include long term or short term trades, cut loss and take profits targets, risk and reward factors, go full in or staggered in, position sizing (what's the size of the position against the full portfolio?) and crucially, why do we buy?
These are important factors to prepare for a trade because they helped us to enter a trade with a clear mindset. It also prevents us from chasing a trade, or adding (what we called 'averaging down' - it's a dirty term, if it was not part of the trade plan, don't do it) all the way down to the bottom. It also helps to inform ourselves not to look back once we have sold our positions as per our plan.
It's exhausting to regret everything you do, don't you think? Have a plan. Trade your plan.
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
