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|A former member||
Investment Frustration, Selling into Fear and Hold Rules
I am struggling with being a better investor and am looking for some feedback. Let me just say I believe the CANSLIM strategy is sound and my success or failure is a result of my faults and errors in applying the methodology.
I have been investing for a little over two years now and have had a few minor success and MANY failures. In looking back, I can see my two biggest obstacles to success have been fear, and lack of patience.
Honestly, one other big issue is my lack of commitment to the process and educating myself. I have relied on the IBD screens to give me my watch lists and not done a lot of homework past that. In a perfect world, where I am flawless, that would be okay and I could have some investing success. However, shocking as it may seem, I am not flawless.
So, fear is an issue. It seems when my investments are doing okay, meaning they’re in positive territory, I’m just fine. But when they go negative, I get worried. As they move down it gets worse and I start looking many times throughout the day at the price action. Sometimes this goes on for days until an up day and then I can relax until, of course, the next down day.
This is where impatience is a problem. As I get worried and scared, I sell. Sometimes, most times, too quickly. Case in point:
On the follow-through day last November I purchased some 3D Systems (DDD) stock and options followed by a similar CommVault (CVLT) purchase a few days later.
DDD was doing okay, but CVLT was flat moving sideways until the market went under pressure in late December. At the time, my DDD investment was up about 15% but CVLT was down. I got scared the uptrend wouldn’t resume, so I sold off the stocks, keeping the options. The uptrend resumed and DDD took off. Seller’s remorse kicked in.
In January, DDD was on fire and my options were doing very well. CVLT was still stuck in the channel and I was frustrated with it. On January 28th DDD tanked and the next day I sold off my options at a pretty good profit. I sold CVLT too because earnings were due out, I had no profit cushion, and it wasn’t moving.
Of course, earnings were great and it broke out of an ascending base. (I had missed the base because of not doing my homework). So I got back in hoping to recoup some losses. Again it moved sideways until, finally last week I was disgusted with its lack of progress and I sold at a loss again.
Today, of course it has surged to a new high well above my buy point. Looking back at the chart all the way to November, I can clearly see there was NEVER a sell signal. Okay, so selling before earnings was technically okay since there was no cushion, but after buying it back there was no reason to sell other than being impatient. Can any of you relate to this?
While reading Bill’s column yesterday he mentioned “hold rules.” Something I hadn’t heard of or come across before, but I thought what a great idea. Buying and selling rules are pretty straight forward (adhering to them is the hard part) but hold rules make sense too. Maybe I should think of them as “Reasons not to sell rules” or “Don’t be afraid, the stock is doing okay, rules.” They’re kind of a buffer between buying and selling and can have a sobering effect on emotional judgment. Anyway, here are a couple I’ve thought of:
• Is the market in an uptrend?
• Is the stock above the buy point?
• Is there a profit cushion?
• Is the volume higher on up days?
• Is the weekly stock action in an uptrend?
• When the stock is down in volume does it show support within a few days?
• Have there been any sell signals?
I welcome input on this and any “hold rule” suggestions you might have.