Stock Market Investor-Trader Experiences and Lessons

Stock Market Investor-Trader Experiences and Lessons

Stock Market Investor-Trader Experiences and Lessons

Introduction: The Investor-Trader Relationship

Be an investor first and trader second. But as you will learn, the two should operate like hand in glove. In the cold war of the financial investing and trading world, the trading hand needs the investing glove.

The glove holds your stocks and shares long term through all weathers, whether your hand is in the glove or not.

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You will not need to use the glove when share prices are high, but you will need to turn to trading mode, which involves using cash to buy more shares when stock prices are low.

You get the hang of it after a while, and you will know how to trade and invest naturally like riding a bicycle.

Emotions And Long Term Trading-Investing Strategy

At the end of the day, you can’t get emotional in trying to make money from stocks. You’re dealing with a chart – share price action that is connected to the operations, and profits of companies.

When your stocks are down and you seem to be losing money you have to consider the following.

It’s not like when you’re trading the price only of a stock, if you haven’t got a stop loss, you could lose money if you get scared and sell.

Or even if you’ve got a stop loss, if you get stopped out you lose money. I mean, the bottom line is, with shares, they are going to go down, even the top shares of the biggest companies, the best of shares do fall too.

So be prepared to experience the price of shares falling, and there are many reasons why stock prices do fall. Most of the reasons are not terminal, it’s just issues that need resolving which takes time.

For example:-

I had bought Facebook $FB shares a few years ago. I spent about £8,000 on Facebook shares. I thought I bought the bottom, but then Facebook stock fell further.

After a few months the share price rose and the stock price doubled and a bit more.

I was afraid I might lose my money, so I sold out. Had I left my £8k in Facebook stock, I basically could’ve cashed in £16k+.

I began to think that the company could end up like MySpace, that the tech bubble could burst, that the company was losing profits because their advertising business was stagnating, that the company could lose market share to emerging competitors.

All these issues and others ran through my mind.

One of the reasons I did sell the stock was because I read comments on the internet that were very pessimistic and those views caused me fear.

It’s worth noting that there are those on the internet who cause fear to panic investors so that investors dump their shares.

When scared investors sell, the fear mongers make money short-selling

There are some people who are paid by hedge funds to sow fear so that the hedge funds who are short-selling can make money. You generally find more negative views than bullish views.

Because when a stock is rising investors do not have any reason to convince others that the price will continue to rise or remain stable, unless it’s a pump and dump situation.

If it is a pump and dump situation then you will read many ramping up comments by many traders who are trying to encourage others to buy into the spike, to believe the hype.

But generally if the stock is not being pumped so it can then be dumped in a short time span, then the stock will be attacked by short-selling bashers.

At that time there were lots of people panicking about Facebook saying it’s going to go down. Imagine investing a large chunk of money into Facebook stock thinking you’ve bought at the bottom.

And then the stock price falls further and you could be in a situation where you’re -50% down.

You’d be pretty depressed moreover given you believed the stock was a good investment because the market cap was high and the companies business model seemed strong.

That stock ended up going back up;

and it went up by more than double than what I had paid. I am trying to change the way I trade to invest to shake off the fear mode.

Because as traders-investors we have to learn to hold for longer just like we can hold longer when we are losing, we should hold longer when we are winning.

We have to avoid selling or buying in the range where big profits cannot be made. We have to buy low, and buy more when the price falls further (but not too soon, leave a gap) and then don’t just sell for 10-20% profits when the price does rise.

Hold out for more profits. For instance if you have bought at a 50% discount. Then you should expect to make at least 50% profit when the stock price returns to say pre-crash.

You know, the rich people are not going to panic

They are not going to panic sell and they hold longer when the share price is rising. That’s why they are rich and/or become richer by putting their money to work on the stock markets in the right way.

Basically, in relation to almost every stock that is down, you can read comments on Twitter and other online conversation boards where stocks are discussed.

In these chat rooms, you’ll find someone writing, ‘I sold, I can’t handle this, or that I sold at a loss or just got my money back.’ You know they can’t handle the pressure, because they’re not experienced traders-investors.

True traders-investors know when the right time to buy a stock is and when to sell that stock. And as I wrote, there are stocks that you need to invest in long term and trade some shares when the time is right.

You could short-sell too, even if you’re a shareholder if the price is high and/or a situation arises which indicates the stock might crash or enter a bear trend.

But this involves more work on your behalf to monitor and there are risks and more charges involved.

The stock market is all the game;

in which the rich people and hedge funds manipulate stocks. They cause stocks to go down. And can cause stocks to rise. They short-sell so they make money when the stock  price is falling and they load up  buying more shares when the price is rising. When they stop short-selling this can cause the price to rise.

That’s what they do. It is one big game. The short-sellers are not just short-sellers you see. In most cases, the hedge funds who short sell are long term investors.

Short-sellers trade both ways;

they go long as well. So they make money on the way down and make money on the way up.

And then you have stocks such as Zion Oil and Gas $ZNOG. You’re trying to buy this stock through the Trading 212 trading platform, and you find out that trading broker has prevented you from buying the stock.

You can’t buy shares in this stock via the Trading 212 app. If you’re already holding the shares in the stock, a message appears which reads, you’re not allowed to buy. Sell only.

I know people who had bought $ZNOG on the Trading 212 platform, and wanted to buy more shares to lower their average when the share price fell a lot. But they were not able to.

Trading 212 say they removed the buying option because the stock became an OTC stock.

However there are other OTC stocks listed on Trading 212 which do have the buying option. So the move to prevent people from buying this and other stocks is unfair.

The trading platform should give good notice of their intensions not just without warning stop people from buying. Trading 212 change their rules whenever they feel like it.

So basically that’s another thing to consider. It’s not impossible to buy $ZNOG. For instance, you can buy through HL, but will be charged high buying/selling fees. Or You could buy through Zion themselves.

However, when you want to sell your shares, they charge $0.10 per share which is a lot at current share price around 15 cents. It’s okay if the share price rose to $1 to $2 or higher, there is less pain to pay 10 cents per share.

But if you buy at say 15 cents and sold at 35 cents that’s a big chunk of your profits.

Otherwise you could open a stock trading account in the U.S., such as Trade Station, but it’s a hassle to open new trading broker accounts to buy certain stocks.

On the other hand if you’re serious about investing long term and going to get involved in a lot of penny stocks, and day/swing trading, it’s well worth opening up a number of trading accounts so you can buy most stocks because not all trading companies list all stocks for numerous reasons.

With OTC stocks, there are specialist trading brokers such as Trade Station and Robbin hood.

It’s not all bad with trading brokers like Trading 212 though. There are advantages such as no buying selling fees when you buy and sell shares. But you may not always get the best price.

And you want to be buying stocks that execute quickly, because if there is a delay and the price moves against you, you’re losing out.

Therefore if the value of your trades is high, and you plan to hold longer, rather than day trading, it probably is worth setting up a trading account through your bank or well established trading broker.

Even though there are buying and selling fees, you will gain in two ways which will off set these costs. The first way is that you get a better price and the second and most important way is the trades executes faster.

So basically to go over the buying/selling process again

This is what they do with stocks. You could just look at any stock, anyone, and you’ll find times when the prices of those stocks have fallen for whatever reason.

And then everybody is obviously panicked that’s why the prices of those stocks have fallen because lots of people have sold.

Then people load up, buying and buying more when those same stocks appear cheap and sentiment returns.

So you know, there’s two ways of looking at it;

You have one investor buying for the long term, mostly growth stocks. Stocks that keep going up. Like the next Amazon…if you can find such a stock.

Or basically you want to buy value, recovery stocks, you want to buy the crash basically, the rock bottom, if possible, but when is the bottom?

You’ve got to be patient, you got to really analyse stocks, charts and price action. You got to know when the bottom is. And you can’t always buy the bottom, thus it’s important not to go all in at once.

Hold some money back and be prepared to buy more, but not too soon. You’ll get more value by waiting for the right time which is at the right price.

You could buy on the way down, but not too soon. You can average down, but not too soon, wait, and buy in stages, moreover if you have the backup money.

Whatever you do, you’re going to find times where you think you have bought at the bottom price of a stock, but then it falls lower.

So obviously you have to hold your position, and know/think/believe that the stock is/should/will go back up one day, and hopefully rise to an even higher stock price.

For example regarding M&S (MKS), during the covid-19 lockdowns, the share price was around 80p to £1 range. I was buying shares to trade because I could make a 5% gain when the price fell and rose again.

So when the price was down, I would buy and sell when price rose and made between £250 to £500.

But I would have made a lot more money if I had just bought £5k worth and held onto my shares through the ups and downs.

This way I would have made more money when the stock recovered fully or went up a lot higher.

And this buying and holding long term would have saved me having to watch the stock all the time in trading mode.

The price of MKS went up at least by double and a half to around £2.60+ so you know had I just invested big when the price was low and held, I would have made a good return for my investment.

Looking back at the MKS chart, when the price was low, the price had been falling from mid-2015 when the share price was high at around £5.50+.

If you view the MKS chart from 1988 you can see a clear patten of, triple, up/down, up/down, up/down. Of course over the years, the company would have had its ups and downs in relation to the business model, sales and restructuring etc.

As an investor, taking the long view, it would have been wise to invest a lump sum for long term, and then load up with more shares when the share price was low and sell that same amount of shares or maybe 90% when the price went higher.

It’s wise to keep some shares to lower your long term average in the stock moreover if you had bought in initially at a higher price.

In this way you profit from the dividends when these are paid. And you profit from the long term swing trades having bought low and sold high, and picked up extra profits on dividends.

And of course all those shares you end up holding long term that you bought cheap on the dips and moreover at stages when the share price had crashed for whatever xyz reason/s.

Of course regarding dividends;

at some stages dividends would have been suspended, but generally these are the times when the share price is low thus the true value, potential profit making opportunities arise so you as an investor-trader can buy shares when prices are low and sell some shares when the price of the stock is high.

It’s a long game you should be prepared to engage in if you take up this type of investing strategy.

When you understand you are in the stock market business for the long term you consider a portfolio loss as a stage of turning it into a portfolio profit.

But you are not going to do this overnight, it takes time and it takes further investment.

So you should be prepared to put in more cash, so that you can take advantage of lower share prices moreover following stock market crashes or opportunities with individual stocks when prices fall.

To make the big money in investing on the stock market;

it’s a mix of investing in growth stocks, for share price value, and also investing in dividends paying companies, but also turning some investments into trades when share prices dictates.

The only thing you have to make sure of, is that the company is going to be around for the long term, and the risks of liquidation is minimal.

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So look at the stock sector, consider the business model and objectives of the company, evaluate the likelihood of the company being around at least 5 years, but 20, 30 years plus ideally.

Moreover if you’re in your 20s you are likely to buy and sell to grow your portfolio thus locking in true value. But do not rush to buy. Do not buy too soon. And do not spend all of your cash bankroll to invest.

Unless there has been a significant stock market crash and you can pick up shares really cheap.

Following 2015, the MKS share price was on the slide, and during the lockdown, M&S teamed up with Ocado who deliver MKS products.

The share price rose a lot a few weeks back, so at a time when it was like 90 pence and the share price had fallen over the years you could have taken the view that this is a bad business, and you do not want to invest in it.

But because it is a food based retail business as well as selling clothes, M&S have a strong business model because they could focus more on food when as they saw the fashion side of the business suffered due to cheaper clothes being sold by the likes of Primark.

Stock prices fall and go sideways at the bottom, things average out overtime and like seasons in nature, stocks can go through different states, cold winter and hot summer ups and downs.

You have to play the waiting game;

so that you can buy low or short high (if you are going to short), but try to leave out emotion and adopt more logic so that you can overcome your fears.

With investing in stocks and shares you have that underlying asset, you own part of the company. Unlike so with cryptocurrencies where the price is reliant solely upon sentiment, hype and manipulation.

There’s no real tangible underlying asset save for its use or function, but even though the function of transactions that can be made using the crypto or blockchain is there, the price of the crypto is affected by perception and is dependant to a large extent on the crowd.

It’s a bit like a Ponzi – pump and dump, when everyone starts buying, the prices rise and profits are made, but when everyone starts selling the whole thing crashes, this is why the swings are really wide, from low to high in a short time span.

With crypto it all depends on the bull run;

or the bear market trends. If you buy and the price falls, you’re stuck, and you have to wait for the next bull run. You could buy more crypto when the prices are low.

But again, there is no company assets behind most of those cryptos. Save some own servers and blockchains and are integrated into the banking system such as $XLM.

Some brokers will pay you interest for holding your crypto, but that pay-out will be low, nowhere near as much as you would get with a lot of dividend paying stocks.

And those brokers want you to hold your cryptos because those brokers in turn earn interest by the size of the value of the money that has been invested.

With shares in individual companies they can go up based on profits and on other factors, but with cryptos it all depends on when the majority of people panic sell or flood in to buy.

Where you see value, it’s best just to load up, buy as much as you think is right, and wait until you believe the return is reasonable. It’s safer to invest in a business that has a rich business model, with an underlying asset.

It’s best to know you’re in the investing business for 10 or 20 years or even longer term. And as I wrote above, you’re investing in possible growth stocks mostly if you can happen to identify the best growth stocks, or what will turn out to be true growth stocks.

Though most of the true growth stocks don’t pay dividends, thus you really have to be patient and allow your money to build up overtime in the value of your stock trading-investing portfolio.

Make the right decisions and the sky is the limit in just how much money it’s possible to make within reason based on the size of what you invest in the first place and how much more money you’re prepared to put in when you spot value with the stocks you choose to invest in.

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