I spent over a decade in the stock market at Morgan Stanley, then another 10+ at Wells Fargo, so you can imagine the size of the stocking stuffer of a chapter I can put together when writing my memoirs about adaptive asset allocation.
There is a list of mistakes that even the most polished professional tends to make, but the most common heard over decades from many Financial Advisors (and investors) is that…
“It feels more comfortable buying something but I don’t know when to sell.”
(Not being able to pull the trigger can be equally troublesome.)
We look at things from the perspective that having a great sell discipline is more important than anything else you can do! Consider this for a moment; if you have a great defense, the other guys can’t win; worse case you tie….right?
But…if you don’t sell properly or at all, you can’t minimize your losses.
Read my lips: “Taking loses is a cost of doing business.” Everyone knows you need to pick the fruit before it rots and yet, it’s very hard for most to do. Losses feel like failure. Failure causes fear and fear births a paralysis. The real thing to fear is the failure to try to fix what you know is broken. We all must cross the bridge of our insecurities and little self doubts in order to find the materials on the other side to build the weapons that fortify our castles.
Portfolio’s are castles. Learn how to build, fight and you will have a more powerful defense than many clients have ever seen I can assure you.
HERE IS YOUR PRESCRIPTION
1. Start out by knowing your risk and your reward.
2. PLAN ahead where you will cut bait and where you take the fish home.
3. There are many ways to do it. Here are a few: resistance, support, relative breakouts and breakdowns.
Here are 2 we played this year to take home the fish to the family.
First we picked up $NFLX on January 9th. (At the blue circle on Weekly stock chart below)
As the breakout continued to the upside, we noticed that it was heading into the top of a rising channel which aligned with a Fibonacci extension target. Once it pulled into the garage, we climbed out for a pretty decent gain!
A second example is $ETSY. This stock had a bullish chart pattern and is a member of the $IBUY Online Retailer ETF. $IBUY is ranked #1 in our Sector7Rotation Model, so we knew we were hunting in the right field!
The exit here was provoked by a couple of Spinning Tops (indecision or reversal pattern) at the 200% Fibonacci Extension.
Begin with making a plan, to make a plan, and stick to it. Investments are for dating, not marriage!
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