# Trade Mental Hurdle



## yask72 (Mar 11, 2012)

Hey everyone,

I am in this mental hurdle that i find myself in sometimes and i'd like your feedback on how to overcome it and or maybe how you've dealt with some of your hurdles. Mine is a simple one, i find myself waiting to purchase a stock because i keep thinking to myself i may get it lower, but then i lose my opportunity because i've waited too long. It doesn't happen often, but it does and its happening right now. Here is my scenario:

I have been wanting to get into GoldCorp (G) for a while now and have done all my research and so forth and i am comfortable in owning it. It's not the actual purchase of the stock that is scaring me. Now that its dropped below my price point (which was 45) i want to get in. But now i find myself saying...well...maybe i should wait till it goes to 43 or 42? I know gold stocks aren't for the faint of heart, but is there any tricks to remove that mindset? I did the same thing on BMO a while back and got burned by that reboud as well. I should stick to my price points, but when the stock drops below my price points, i find myself waiting and losing my opportunity.

This doesn't happen often...but now that i think of it, for some reason i only have this issue with BMO and G in particular. 

Thoughts?


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## Zeeshan Hamid (Feb 28, 2012)

You can put a buy limit order. If you're worried about missing out if the stock takes off, you could put a buy-stop-limit order. Tweak it as price continues to drop. That way you wont "miss out" while you wait for the price to drop.


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## Causalien (Apr 4, 2009)

It depends on if greed or fear is holding you back. Get on tune with what you were feeling and get back to us


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## doctrine (Sep 30, 2011)

Do you have a target price?

For example, when I buy a stock, I have an expectation of gains. For example, if I buy Telus now at $57, I would expect to get 5% a year on the stock price plus 4.3% on the dividend. Thus, in 5 years I would expect the stock to be around $73.

Should I buy Telus at $57? Or should I hold out for $55? Does it really matter if I expect it to be (conservatively estimated) $73 in 5 years?


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## Toronto.gal (Jan 8, 2010)

yask72 said:


> This doesn't happen often..


In that case, you don't really have a problem.

Every investor has experienced fear, greed & indecision, so you're not alone.

Have a solid plan and stick to your goals for the most part.

If things don't go your way, there are steps you can take.


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## MoneyGal (Apr 24, 2009)

In case it is helpful, one of the "tricks" I use in similar situations is to tell myself, "I already made that decision." That is, you had already decided your buy-in price was $45 -- now you want to revisit that decision. So one quick way around that is to relate to the decision as a done deal, not something you are going to revisit in the moment. Right?


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## kcowan (Jul 1, 2010)

Naturally you want to avoid catching a falling knife. So you can watch the volumes and the bid/ask spread and try to catch it at the bottom. You have already concluded that $45 is a good deal, so getting it for anything less is a bargain!

Once you buy it, stop looking for a while!


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## londoncalling (Sep 17, 2011)

Toronto.gal said:


> If things don't go your way, there are steps you can take.


Care to expand on the steps that can be taken Tgal? I am not having the mental hurdle mentioned above. Not to stray too far from the OP but am dealing with a scenario that is the opposite. I am unable to stray from my target even a few pennies and it has cost me some nice run ups over the past few weeks. I do have considerable patience and realize that there will be other opportunities however, I would like to take advantage of my efforts so by offering the original poster on some options on what can be done when things don't go your way it could be useful to many of us lesser experienced members. I would agree with the idea to use limit orders. I have never put in a market order and know there are situations when it can make sense as mentioned on a different thread.

Cheers!


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## Jungle (Feb 17, 2010)

I pick an entry point I would like to buy and then leave enough money to buy more if it drops. Also with gold miners they really go up and down. We've seen this over the last few weeks as people are exiting gold and bonds for more risker assets.


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## GOB (Feb 15, 2011)

Selling puts seems like an ideal solution for someone in your situation. You could have sold a put for G at a $45.00 strike, and received some cash in return. When G hit $45 you would be obligated to purchase at that price, but your actual cost basis would be lower because of the premium you received when you sold the put. If G never went down to $45 by the time the option expired, you get to keep the premium. It takes a lot of the emotion out of trading because you make the decision ahead of time and are kind of forced to stick by it. In return though, those premiums can add up quite nicely.


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## Cal (Jun 17, 2009)

Sounds like greed is your enemy. Now that it is below your pp, just put in an order that may get hit on the daily low. And wait for a day or two, unless you feel that there is something that is fundamentally driving the price lower.


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## dogcom (May 23, 2009)

With G I would also look at the price of gold itself to see if it would be a good time to buy. If gold is still overbought and looks to drop farther then Goldcorp may have farther to drop as the metal itself drops. Also look at the seasonal pattern for gold which does seem to bottom in mid March for a surge into April before dropping again into the summer. You can also look at the US dollar and if you think there is a big rally coming for the dollar then the stock may still drop. 

I bought in last week at $43.70 sold at $44.31 and bought it back at $44.00 because I couldn't resist the urge to make a little to pay the trading costs and now I am holding. There is some short term stuff to think about as you make your decision.


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## hboy43 (May 10, 2009)

Hi:

Pay attention to the health of the forest (portfolio), not any one tree (trade or holding).

You cannot control whether any one buy or sell is done at a terrible (short term) price. You only know once the future rolls in and hindsight advises.

What you can do is buy more if the price heads down sharply.

What you can do is buy lowish and sell highish.

What you can do is diversify and rebalance amongst your holdings.

What you can do is control expenses.

Some trades are going to be miserable in the short and even not so short term. Other than a few intervals of days or hours even, I have been under water on JNJ for years. Still gives me a dividend that beats a GIC though. Disappointing? Sure. Problem? Not really, JNJ is just a weak tree in a healthy forest. Right now, it is not a potential veneer log*, but maybe it provides a home for a squirrel.

Faced with a short term loser, many (most?) people will say "crap" and sell the position. I usually say "crap" followed by more buying at the lower price. A recent example was BBD.B at $5.17, "crap", followed by BBD.B at $3.60. As of today, these two trades are still a net "crap", but that is the nature of investing. 

Other recent trades are "yay", especially NBD. The forest is in good shape.

hboy43

* a veneer log is to logging what a 10 bagger is to investing.


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## Toronto.gal (Jan 8, 2010)

londoncalling said:


> Care to expand on the steps that can be taken Tgal?


Hboy & others have summarized a lot of what I was going to say.

I typically have an entry/exit strategy based on my evaluation [technical analysis/momentum of the stock]/personal goals/time horizon, etc. 

My preference is to buy certain volatile stocks in tranches [also depending on capital involved]; there are exceptions of course, like when there would be a significant drop in price, and to use hboy's recent example, like when BBD.B shares dropped -24% in the last couple of weeks [$4.81/$3.87]. At that point, figuring the downside was limited, I would make a larger purchase than I may have without the steep decline since Feb.29 in order to take advantage of the stock's recovery [I ended up buying at different prices in this example, but my largest purchase was in the cheapest tranche]. 

I also exit in tranches, so for example, if I had purchased at:

$3.90/$4.05/$4.20 [for an ACB of $4.05], I would not necessarily wait for the shares to move higher than my ACB to sell a portion [assuming I wanted to book some profits and/or sell for re-balancing purposes]; I would simply sell the portion that would provide a profit, ie: the $3.90 lot [unless I wanted to lock-in those low rates for long term]. That way, I would free-up some capital so as to take advantage of future price-drops in same or other stock.

* - If person sells* without averaging down upon a significant price drop, losses [if any] are not recoverable [not talking about a falling knife with little or no chances of recovery, in which case, some losses is preferable to losing all, such as in the case of TRE].

* - Selling a smaller loss* on occasion to avoid a larger one, is also a good option when things are not going your way [if temporary downturn] and/or your risk tolerance is low. In such scenario, if the stock drops much further, you can jump in at a later time & make up your original loss by having bought the stock for a lower price than initially purchased. 

* - Stop order* already mentioned that limits one's losses [personally not a fan of this one].

* - If person holds* original shares and does not buy additional when there are several drops [as in the BBD.B example], one would require a much higher percentage gain just to recover/break even [as opposed to making a profit in such recovery], whereas if investor had taken advantage of the various drops in price [of course cash is not always available for this nor the right thing to do in all cases], the percentage gain required to break even, relative to the purchase price, would be much lower & achieved faster. It is also true however, that the additional funds could have been invested and doing better elsewhere had it not been invested in the same declining stock, but that would also not be a guarantee, not even if it had been invested in AAPL stock [unless invested just before the release of the iPad3, which is what Lucy should have done with her $65k last week instead of buying MCD for the dividend].  

Like someone mentioned, there are more complex hedging instruments, like Options, but that is not always an alternative available for all stocks and/or types of investors.

*Often times we have been presented with strong, if not screaming buying signals/opportunities that we should not have missed/ignored simply out of fear of a further drop in price;* opportunities such as: SU back in September/2011; ECA in January/2012; BAC in December/2011, etc. I would think many of us have learned the lesson of missed chances since 2009.

Understand the news around you; know your stock's fundamentals & long term trends as well as your personal risk/reward expectations, then act accordingly.


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## londoncalling (Sep 17, 2011)

Thanks for the reminders of what one can do when they lose their way. I am aware of most of these steps. Investing can be largely psychological. I guess that's why we have the term behavioural finance in our lexicon.

Cheers!


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## KaeJS (Sep 28, 2010)

MoneyGal said:


> In case it is helpful, one of the "tricks" I use in similar situations is to tell myself, "I already made that decision." That is, you had already decided your buy-in price was $45 -- now you want to revisit that decision. So one quick way around that is to relate to the decision as a done deal, not something you are going to revisit in the moment. Right?


^ This is fantastic advice.

T.Gal always has great information, as well. (Both of the "Gal's") 

*yask,* it seems like Dollar Cost Averaging (DCA) would help you out the most.

You think G is a good buy at $45 (in fact, I think it is, too. For the most part). What you need to do is purchase the stock and if it falls even more, you need to purchase more.

I just bought G the other day at $44.38. Did I buy at the lowest point? Definitely not. But if it went below $42, I'd probably buy more.

DCA is your best friend.


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## dogcom (May 23, 2009)

I would still check for news on Goldcorp as it drops because maybe there will be a good reason for it staying down before I buy more or maybe I need to get out. All companies have to be constantly looked at unless you own and ETF or a fund. Of course noise can be ignored for a long term holder but certain news cannot be ignored.


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## gibor365 (Apr 1, 2011)

dogcom said:


> I would still check for news on Goldcorp as it drops because maybe there will be a good reason for it staying down before I buy more or maybe I need to get out. All companies have to be constantly looked at unless you own and ETF or a fund. Of course noise can be ignored for a long term holder but certain news cannot be ignored.


Yes, curtainly, you can check new before....the only problem that we are (retaild small investors) etting news the last and all news ussually already is priced in... you can only to catch trend...


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## dogcom (May 23, 2009)

Not necessarily, you may lose some money but getting out quickly can save you a lot of money. I have done it a few times and dumped before things really got out of hand. Or the company is having issues that don't seem to be resolving like RIM last year and you decide it is best to get out instead of buying more. Getting out of RIM at $45 last year would have been wonderful when you compare it to where it is at today.


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## gibor365 (Apr 1, 2011)

dogcom said:


> Not necessarily, you may lose some money but getting out quickly can save you a lot of money. I have done it a few times and dumped before things really got out of hand. Or the company is having issues that don't seem to be resolving like RIM last year and you decide it is best to get out instead of buying more. Getting out of RIM at $45 last year would have been wonderful when you compare it to where it is at today.


It all depends... for myself getting out of CEL at $21.6 was better than to average down and have it now for $12, or selling TCM above 10 (yes, with losses) was better than to keep it have now at $7...
on the other hand now I think that should not sell PBN at $16.68... but who knows what gonna happen in future?!
Good think that didn't sell DAY at 50% loss, and after it has been aquired, got even small gain...


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