Select Page

Sabotaging Your Portfolio| 02 | You vs You

Sabotaging Your Portfolio| 02 | You vs You

Sabotage | 02 | You vs You

This is a really fun one. And super important for you if you want to learn to think like a Merchant.

In this segment, You vs You, we deal with the internal you. The one that you deal with all the time.

You see, as we’re heading out of the dip I reflect on the correspondence I’ve had with many visitors and subscribers. It struck me that while I am focused, with an eagle eye on the goal, there are many who are excited by a bounce and terrified simultaneously. This can leave an emotional trader engaging in regretful activity which either blows the account or robs them of potential gains.

Grateful Selling | Emotional Trader’s Bane

There are many aspects and layers of Self Sabotage that we will discuss  in You vs You, in the future.

However, I’d like to delve into the following aspect of Self Sabotage:

_

Grateful Selling/Grateful Exit

Grateful:

  • feeling or showing an appreciation for something done or received.

received or experienced with gratitude; welcome: the grateful shade.

_

I imagine that many investors or traders that bought near a high are watching their stock prices with keen interest, waiting for the grateful shade to rest their anxious bones. Regret is usually the first thought process to follow when one enters a transaction, only to have it sink below one’s entry price.

So let me tell you what I used to do.

Bargaining

_

[Disclaimer: I’m not a financial advisor. Your wealth is at risk. Seek professional advice and do your own research. You’re reading the thoughts of a trader that has put his own wealth at risk. Don’t base your trades on this information. This entire site is for educational purposes only and a financial professional should be consulted before making any financial decisions]

_

 “If I could just make my money back…”

“If I could just recoup my losses…”

“if I could just break even…”

Sound familiar? Yes that was me too. A Merchant doesn’t bargain or negotiate with their inner thoughts.

A Merchant is either participating in a transaction or not. No in between.

Let me explain.

The “dip” in gold  & silver prices ended up being the largest dip of the year, so it ended up flushing many retail traders out of the system. I tweeted my balance on a daily basis for transparency. If I, as a Merchant, were not confident in the overall thesis or story behind gold, then I should have sold my positions. However, as you know, I have actually used the regression in my portfolio as an educational insight for readers. I have posted on how to mentally process drawdowns as well as materials on a daily basis regarding where we were at with Gold in the bigger scheme of themes. I also shared my thought process to explain why, as a Merchant, I was excited about the expected bounce and why I would enter if I were all cash.

From the date of the post where I prepared you all for a drawdown, my account fluctuated from -17k to -40k.

My old self would have said, “If only I can break even, then I would get out”.  This means that as my account returns back to levels prior to the dip, that I would grow in anxiety considering whether or not I would sell. Like many traders, I would have confided in my loved ones or friends, who would reply “You’ll make it back.

Therefore, to feel better, we sought comfort from those around us, which is lovely from a support perspective, however, also increases the pressure to exit once the losses are close to zero.

The point?

I expect many, many emotional traders to set imaginary levels where they will exit once it hits that level. As a Merchant I’ve repeated many times: I will remain in my position until Gold is overbought.  Easier said than done.

This is used to be an extreme challenge, because in order to head into overbought conditions one actually starts to make money.

Now this is a topic for an entire new post, but essentially, after experiencing so many lost profits over my time trading, I would get really scared when my account started glowing green. I would reflect on my my previous self-bargaining and say “I said that I would take profits next time, so here goes: I’m selling. I’m so grateful that I’m finally booking a profit“.

Except my act of selling at a particular price was based on nothing. This is what I call, grateful selling.  Selling out because of the need to feel accomplished. Selling to finally tell all those should you cried on that you made back your losses.

Except, the market doesn’t care where you bought or sold. It will follow its trend and it will continue it’s price action until the market is exhausted and then changes. I once bought a share for $1.  Leading up to that moment, I had actually experienced many losses from holding winning shares too long. So when I bought that $1 share I was focused (albeit on the wrong goal). When the share hit $1.20 I sold, booking it “beautiful” profit of $2000 AUD.  Why did I sell? I sold because I was convinced that I was so smart  that I would sell now and buy back cheaper. Of course, I did not realise where I was in the grand scheme of things or the economic cycle. That share rose to $3.60 over the next 6 months.

I booked a $2k AUD profit, but kissed goodbye the $24K AUD  I could have made by simply buying and holding for 6 months. “Silly!” you say?

Well many traders are about to do the same.

 

Struggling to Buy Stocks, probably means you'll Struggle to Sell Stocks

You see, I want my account balance to sky rocket. I wan’t to stand in the open field of wonder and witness the wonders of capitalism through the growth of my portfolio value.  But making money is frightening too. As the profit begins to accumulated, most traders start converting that money into materials things: college education, a trip for the family, a new car. It’s like Deal or No Deal! And guess what? It is. But the difference between my old self and having a Merchant’s Mindset, is that I am acutely aware of how many cases are left to choose from.

Imagine participating in Deal or No Deal. It’s not something I watch, but I have family…you know.

It’s a show where cases are placed in front of the participant and as each case gets opened the player has to make a choice of whether they want to take the deal offered to them, of continue to open more cases but increasing the risk of losing everything.

Imagine if there were 100 cases in front of you, with 100 possibilities, and after opening the first case of let’s say $500, you get excited and take the deal. Game Show over.

That was me, selling my holding for $1.20 when the trend and trajectory was up. I was too self-involved to see at the bigger picture and I sold,  being grateful, only to regret my gratitude days and weeks later.

_

[Disclaimer: I’m not a financial advisor. Your wealth is at risk. Seek professional advice and do your own research. You’re reading the thoughts of a trader that has put his own wealth at risk. Don’t base your trades on this information. This entire site is for educational purposes only and a financial professional should be consulted before making any financial decisions]

_

Conclusion

I believe we’re in a bull market for Gold. A bull market generates higher highs and each low is also higher. So in the current situation with gold, the previous dip which threw most traders off was $1199 and now the dip was $1248. There will be a dip again, but if this is a bull market it should be higher, maybe around $1300? Not sure. Not important right now.

What’s important is the big picture which is that if this is a bull market, then Gold will top the previous high of $1377 something. At that stage I will assess and formulate an exit. That does not mean that I will sell at $1377. It means I will assess the economic and market environment to take stock of where were are in the bigger scheme of things. In the meantime, I expect my gold and silver mining holdings to fluctuate tremendously, but trending up.

So, just as I feel nothing when I tweeted my -$40k AUD balance, I will feel nothing as I tweet my $10k, $40k etc balances.

I won’t imagine what I’ll do with the money. I won’t fantasise about being congratulated by friends and family. I’ll simply continue to do what I do until I convert to cash. When I convert to cash then the transaction is completed.

If I don’t have fear. there will be no need to bargain.

Grateful selling does not feature in the mindset of a Merchant.

_

If you are interested in becoming a member please contact me here. The Merchant Method is based on the lessons, fundamentals and methods that I have noticed during my time transacting on the stock market.

My aim is to help those who are willing and to help establish them as more than traders. I wish to help others on their way to becoming fully fledged Merchants who are successful thinkers and profitable business people.

_

Humbled by many. See you around the stock exchange.

| the Merchant

P.S If you like it, please share it.

Also, Trades page is back up here.

Don’t miss out on the Patron’s second post here.

_

[Disclaimer: I’m not a financial advisor. Your wealth is at risk. Seek professional advice and do your own research. You’re reading the thoughts of a trader that has put his own wealth at risk. Don’t base your trades on this information. This entire site is for educational purposes only and a financial professional should be consulted before making any financial decisions]

_

 

5 Comments

  1. Taxman

    I see you are documenting you folios development (value $$), but how does Tax affect your bottom line and do you have a strategy?

    Reply
    • the Merchant

      Thanks for the question. Two CGT questions in one day ? I’ll be discussing tax this weekend. A close colleague of mine is a CPA so personally all good for strategy. I’ll just be sharing a few thoughts on CGT over the weekend Q&A. Thanks for the comment and support.

      Reply
  2. Paul

    I’m really enjoying your blog by the way, keep up the good work.

    Reply
  3. Paul

    I picked up some shares in RSG 7 months ago and watched in awe over the next 6 months. I would have been tempted to sell around the $2.25 mark and watch and wait and would have most likely jumped back in at $1.70 mark however the thought of 40% CGT is ever-present. If I had held the shares longer than 12 months for the 50% CGT reduction then the cost/benefit would have made sense but if the shares had been sold in under 12 months and I wanted to buy the dip I would be buying back the 100000 shares and the spread would all be tax, so really a zero sum exercise. In this instance I was expecting a bounce and am unconcerned. My trades have been very much me vs me vs tax man; I am sure I need to adjust my thinking but would greatly appreciate some perspective on this sort of scenario.

    Reply
    • the Merchant

      Thanks Paul. We’re all in the same boat. I will spend some time on this in Q&A. It’s essentially determined by performance of the trades vs hold and wait. Great question and worthy of a Q&A answer.

      Reply

Leave a Reply

Pin It on Pinterest

Share This