Don't Fall in Love

[Bullitt]

I see a troubling trend here of mass sentiment looking to sell dollars in order to buy gold, oil, stocks or anything for that matter that trades on an open market. How much longer will it last? Weeks-Months-Years???? Great post from 12/4/1999 here that I found on a google message board. I wonder how Gary fared in 2000 and if he managed to break up with his 'friends'.

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Google Groups: misc.invest.stocks (http://groups.google.com/group/misc.invest.stocks/browse_thread/thread/ba0c834f55c0c56d/7e41f0d0284ea959?lnk=st&q=%22fall+in+love+with+a+stock%22+%22fall+in+love+ with+a+stock%22#7e41f0d0284ea959)
Newsgroups: misc.invest.stocks
From: “Gary Shannon”
Date: 1999/12/04
Subject: Re: Best of both worlds

They say you should never fall in love with a stock. Well, I’m in love with all my stocks. I’m familiar and comfortable with them. They’ve made money for me and I understand their personalities. They are my friends, my buddies. That’s how close I need to feel to a stock before I’ll trade it. If you’re feeling grumpy you might put on a smile and fool a stranger, but your phoney smile will never fool a close friend. And when one of my stocks is feeling frisky, or feeling grumpy, it can’t fool me either. I know them too well.

[Bullitt]

* Does the stock market lack firmness? Stocks are currently 36% undervalued according to the IBES Valuation Model. Does that sound like a market sitting on a weak foundation? --Clif Droke October 29, 2007

* Now that the bull market is back, it's the "perfect time" to buy Boeing (BA), Air Products (APD), Terex (TEX), Energizer (ENR). --Jim Cramer October 15, 2007

* "Bull Market Turns Five" S&P's equity analysts, using their 12-month target prices for S&P 500 companies, project this U.S. large-cap benchmark to advance nearly 12%, ending September, 2008, near the 1700 level. --Businessweek October 9, 2007

* "Americans are still woefully underexposed to foreign stocks." So how much foreign exposure should investors have? "We suggest that 20 to 25 percent of equity investments be in foreign investments," says William Stone, the chief investment strategist at PNC Wealth Management. --October 31, 2007

* Chinese investors who really want to be part of what’s happening in their own country right now, another 30% to 50% to the upside wouldn’t be out of the question in my mind. I also like the fact that so many people are becoming pessimistic in the face of rising prices and increasing economic strength. As you know, that so-called “Wall of Worry” is actually very bullish from an investing standpoint. --Keith Fitz-Gerald (Asia Expert) October 17, 2007

[James48843]

Yep-


This market in the last month is scaring the heck out of me. We're wayyyy overdue for a breather.

Hang on- be ready to jump.

[JimmyJoe]

I think we'll be OK for the rest of April. Granted I'm 23% in the F to give me some reaction time. Still January was a bad stock month and I think we're getting some of those returns back. The Fast Money folks and Jim Cramer are giddy today, touting great numbers up to, I'm guessing, September and October. You are right though, I still keep my finger on the trigger. I just can't afford a big loss.

[Birchtree]

I'd rather jump into 15 feet elephant grass than risk jumping out of this market.

[alevin]

Great article this morning. Here's a sample.



The most difficult thing for traders to do is to sit there and wait. Why? Because, we live in a world that is on a total dopamine, hypomanic binge. This is never more clearly manifest than by those who absolutely have to be in the markets at all times, desperately need to be trading and simply cannot wait.

At one level, this is a type of addiction to excitement, mediated in part by the neurochemical called dopamine. It is the thrill of the game, and the rush that comes from the anticipation of reward. "I have to get in NOW because the price is running away from me. If I just chase it this once, it should be OK because it makes me feel so good when I see the price going up, and I am convinced that I can make a killing on this one. Why should I wait for the price to come to me? Maybe it won't, and then I will have missed it all. There's no fun in that. "This sounds all well and good, and the dopamine brain pathways, which are activated by potential for reward, kick into high gear. The dopamine neurons are firing on all cylinders, and the feeling is one of pure exhilaration. It's all good and wonderful---until it isn't.

Suddenly, the position starts to turn against you. You chased, it came back in and now you are looking at a drawdown. How do you feel, and what do you do?

Well, there's no fun in losing, either. The dopamine reward pathways of the brain shut down, and the brain connections that mediate fear start begin to activate. The end result is confusion, frustration, blaming, self-sabotage, addiction and systemic toxicity. All of these drain the trader and leave him feeling empty, confused, disillusioned and just plain worn out.

Patience frees you from active involvement in the chaotic, and often reckless, behavior of others in the markets.

When you first started trading, what did you hear constantly? Preserve your capital. You heard it, but maybe you did not listen, or did not understand. If you are chasing or getting in just to get in and are getting whipsawed daily; and you are losing, drip by drip, or in larger chunks, you are out of the game. If you are cutting your winners too quickly and letting your losers ride, you are out of the game.

If you wait, take time, assess the situation and then pounce like a jaguar at the right opportunity, your chances for trader longevity increase significantly. You have preserved your financial capital, and deployed it appropriately with a good risk/reward ratio.

However, there is something much more important about capital. It is both financial and psychological. Money is a by-product of the great game of trading.

Your psychological capital is the essence of the person you are...as a trader, an investor or a human being. The first rule trading is: preserve your psychological and financial capital. This means making yourself emotionally, mentally, physically and spiritually strong and healthy. Stand apart from yourself, and look with a critical eye, almost as if you were advising someone else how to trade. When you are able to remove yourself from yourself, you minimize emotional charge. you can put yourself in a neutral position. You allow the newer, thinking portions of your brain to put the older primitive, dopamine-driven brain into perspective.

This is the most difficult journey you have as a trader. You can go out and earn more money, you can turn your money over to someone else to manage, or you can stop trading and invest your energies in some new activity. You have infinite choices about what to do with your money. But, you have only one body, one mind and one spirit.

Save yourself. Preserve yourself. You are all you have!

When you are stressed, sleep-deprived, contaminated with continual worrisome thoughts or in a toxic state because of bad trades, junk food, disorganized and negative-karmic environment or dysfunctional relationships, you have nothing but despair, self-loathing, anger or depression. You are in a state of mental and physical dis-ease and whipsaw, and should absolutely not be trading.


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