July 21, 2011- Can you see the forest amidst the trees?

Sometimes traders are too concentrated on all the small details, all the whipsaws, the 3-5% downticks for the day, despite the strong uptrend (30% up for the past 3 months) that we fail to see the big picture.  Why are traders often too hesitant to hold their winning positions when it’s pausing for 3-5 days?  Do you honestly think you can always enter and exit despite all the commissions?  This is really just an honest question I pose to myself.

While  a lot of “fake investors” and “tsismis traders” only see one tree- the target price (E.g. Stock PWR to hit 5 pesos, or Stock ZHI to hit ceiling), that they end up waiting for those target prices.  Another misstep I normally observe from most traders is that we (active traders) too often lose sight of the big picture, and settle for short term gains.  I have checked my 5 months trades, and noticed that bulk of all my gains came from just a handful of stocks.  They were all in the same sector, and I normally got to trade in and out of them.  A stock had moved 100% for the past few months, and holding my shares would have yielded more gains than just buying and selling, and moving to other laggards.

I do not intend to say that you should never sell your winning stocks.  Only that it’s normally difficult to buy back those same number of shares once it rises again.  You’re a super trader if you can always buy every pullback, sell at every short term peak, and ride the whole trend all the way.  It’s easier said than done, that once a trader gets out of his position wholly (and not leaving any of his shares) that he can buy it back for a cheaper price, especially if the momentum is strong.

This, I say, as a warning to all the traders who normally take all their short term gains, and sell everything at once.  I’ve learned the difference of selling and lightening down.  Check your journals if I’m lying.  The upside risk is larger when you sell everything, rather than hold, and have a “buy on pullback” mode, every single time you trade stocks who are on a momentum uptrend.

ELI, for instance, which was bought at 0.77 area went to 0.86 next day and corrected to .80 yesterday.  It resumed its surge to 0.90 again today, and will possibly go to new highs the next coming days.  I can say the same thing for all the LCs, MAs and all other stocks in the mining sector.  All I know is that when a stock is in an uptrend, I find it a smaller risk to hold them, rather than sell everything.

You never know when you’re going to run across one of those little gems that seems almost a penny at first sight but eventually turn out to be a priceless life changing stock.

Simple words. Simple Maxims.  Look at the big picture.  Keep your trading simple.  Hold your shares when there’s no reason to sell all.  The trend is your friend, and this advice never fails.

Most major changes are not the results of massive action for one single day. They are the results of minor influences at strategic points.

Don’t lose sight in the flurry of trees.  You’re in a forest with huge potential.  Stay in it.

-The Faceless Trader

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