It’s been 6 months since I’ve started stock trading / investing, it’s been a good journey for me so far being able to ride the bull market. I have earned good amounts from my investments but I’m no expert, I always feel that there’s so much to learn and I want to learn more. So these are my Lessons learned after 6 months of Stock Trading / Investing.
My Lessons learned after 6 months of Stock Trading / Investing.
Lesson #1: Fundamental vs Technical Analysis
I’ve written a post on Fundamental vs Technical Analysis or Both? I think each one has its strengths and weaknesses, but one thing is for sure, there’s a connection between the two and what I (personal opinion) think right now is that Technical analysis is about the emotions of traders / investors and to get them to be happy there has to be good news all the time. To have good news, you got to have good fundamentals.
Lesson #2: Institutions Rule
What’s your thousands or millions compared to the billions that institutions hold. Recently, the market corrected for almost 2 weeks, that’s coming from a sell signal from a fund manager and the index dropped significantly (I went under at that point). This is just the power of Institutions, if they decided it’s enough everything goes down low. You have to respect that and never go against it in trading (but not necessarily when investing, especially for long term holds). I learned to respect their buys / sells and have to learn to go along with them with my trades but go against them when things become cheap fundamentally (when I know I have a good margin of safety). If you’re able to track this, you’ll see how it works.
Lesson #3: Learn to take Profits
Sometimes we can get really greedy or fall in love in stocks too much, and guess what happens to our profits? Wiped out! During the bull market, I watched my value soar high just to feel shit when correction happens (and the cycle goes on and on). And during these correction period, I should’ve taken profits so now I could be bargain hunting. I remember attending the Market Outlook 2013 from our group The Global Filipino Investors, and a talk particularly with Technical Analysis expert, Ramir Libre. What he said was, whenever the market reaches an all time high, take profits. I’ll be trying this strategy soon, if the PSEI reaches another high.
Lesson #4: Learn about Macro Economics
When you look at a business, that’s a micro level, but if you look at the whole Philippines economy, that’s macro. So why is this important? I believe these indicators would tell us if it’s still safe to invest or is the market going down. I have yet to learn this fully, but I’m starting to read up on these. I think it’s important to understand what these indicators mean and its impact on the stocks we invest in.
Lesson #5: Stick to a Plan
The biggest problem is that it can become so tempting at times to not stick to our plans, like from buy and hold to cutting loss and moving on to the next stock. Luckily, last week when the investment ratings went up, my stocks went back to normal levels and I’ve gained before the month ended but not to my target of at least 5%. I could be lucky on this, but my point is that it’s so easy and so tempting to break our plan but if I’m keep at my plan, I’ll be ok or at least suffer the least amount than going plan-less.