When it Pinches, Then You Buy

What is a good time to buy for the long-term?

Is there some kind of formula? Mathematical equation? Algorithm?

Who doesn’t look for the holy grail?

Sure, there are technicals galore, to assist one’s buying and fix its appropriate time. 

Of course, fundamentals, when studied properly, are even more helpful. 

However, neither technicals nor fundamentals can replace emotion.

The emotional alarm, when sounded, is a good time to buy for the long-term. 

Surprised?

Here you are, getting alarmed at how the markets are falling. 

How are you supposed to buy with a straight face amidst the panic?

That’s just it. 

Markets are wired in an opposite fashion to our mentality. 

At the onset of margin of safety, our mental framework emits panic upon seeing the mayhem. 

Upon the vanishing of margin of safety, the same mental framework emits euphoria and wants to participate in the rally. This is trading, not long-term investing, and as long as you buy high and sell higher, you are good. What you are not going to do here is hold your trade for the long-term, thinking it’s a long-term buy. What has not been bought with margin of safety is not a long-term hold. 

Why?

Margin of safety gives us a buffer. 

Let the markets fall; they still don’t reach our entry price. Or, they only fall a tad under it, and then start to rise again. That’s the beauty of buying with margin of safety. You can use the low now created to pick up some more, if you are still convinced about the stock. Otherwise, you can always exit the stock on a high. 

In long-tem investing, one should not exit on a low due to panic. If one does so, it’s like market suicide. 

What causes exits on lows?

Panic. 

Need for money.

Weak hands. 

Become a strong hand. 

Put in only that money which you don’t need for the next ten years. Make sure before entry that you won’t be pulling out this money in the middle of the investment if you can help it. Have a fallback family fund to lean on ready before you start putting money into the market for the long-term. 

Teach yourself not to panic. Rewire yourself alongside the market. This takes time. It took me almost a decade to rewire myself. Everyone needs to go through this rewiring process.

Once you’re rewired and  financially secure, your strong mind will pick up on the emotional trigger, and will start buying when the pinch-factor kicks in. 

Your strong hands won’t let go owing to panic. 

In the long run, your investment, which has been made with margin of safety and proper due diligence, will yield you a fortune.

Happy investing!

🙂

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When it Rains Learning

Yeah, when does it…

…rain learning?

You probably might not like what you hear.

Are you used to solitude? Working on your own? Own decision-making?

Or…

…do you look for approval?

…all the time?

We spoonfeed our loved ones when they ask us for help. I’m guilty of this too.

However, in my solitude I did realize, that spoonfeeding is the sworn enemy of learning.

What is learning?

Inculcation to the extent of translation into DNA – that’s learning.

It’s an intrinsic process. Yes, everything about learning happens inside.

When does it rain learning?

When you’re dependent upon yourself for your decisions, that’s when.

One wrong step could break you, so you’re cautious.

Your system is working at full-stretch.

It’s an intense time.

That’s the melting-pot required for DNA translation.

A wrong decision causing loss is rich in learning.

It can also cause depression. However, you know better. You get up, learn, and move on.

A right decision causing profit boosts confidence.

It can also cause euphoria, which offers an entry door towards destruction.

However, you know better.

 

 

 

 

 

 

Breathing Space

I like to breathe…

…between trades. 

There’s something fresh about being market neutral. 

One is decoupled from market forces. 

One feels light. 

If one has just closed a losing trade, there’s hung-over disappointment. 

Forget. 

Breathe. 

Move on. 

On the other hand, if one has just closed a winning trade…

…there’s remnant euphoria. 

Forget.

Breathe. 

Move on. 

Why forget?

The next trade is the next trade. 

It has nothing to do with the previous trade. 

Also, one is recuperating, remember?

Market forces take a toll. 

Market neutral air allows the system to regenerate. 

Don’t mistake this market neutral with the other market neutral. 

Insiders speak of being market neutral when they are hedged, and trades on both sides result in an overall market neutral stance for them. 

Hedged market neutral candidates experience a double whammy of market forces. 

You’ve understood by now, that we are talking about the “not in the of the market” neutral stance. 

Should one then even call it market neutral?

I mean, one can call it sitting out, or something. 

I like to call it market neutral breathing space.

When does the neutral strictly apply?

When I don’t know if the next trade is going to be long or short.

What will the trade direction depend upon?

Data. 

Chart. 

Technicals. 

Fundamentals. 

Whatever cooks your goose. 

However, sometimes, one is on a short-short strategy, or for that matter a long-long strategy. Meaning, that one might be out of a trade, but one is waiting to go short (long) on the next one, and so on and so forth. Meaning that one knows one’s trade direction for a defined time frame. 

Well, I still like to call the breathing space between trades market neutral, even here, because the word “neutral” reminds me to keep an unbiased mind about the next entry point. 

I try to then look at the chart free from the remains of previous experience, in my search for an entry point, even though I know the direction that I will be trading.

How much time can one spend between trades?

Depends on when the next setup arrives. 

Why the hurry?

Enjoy the calm of the space.

Dance the Bawwdy Music!

..dance the body music

makes you feel so happy

dance the body music

music makes you happy

hear the music play

feel your body sway

hear the dj say

oh what a big smash big smash

dance the body music…

 

Osibisa, was it, late ‘70s?

Yup. 

What an cool swingy number, sung by an unforgettable band!

Disco beat. Rhythm. Easy peasy lyrics. Synth. Floor’s going crazy. Song’s all over the people. People are all over the song. 

Euphoria. 

Why are we talking about it?

Music or euphoria?

Euphoria. 

I used the music element to paint a picture of euphoria in your mind.

What is it about euphoria?

Why does it push me on alert?

Is it that I don’t wish to enjoy my life?

What could I have against euphoria?

I’ll tell you. 

Before I tell you, I’d like to mention that I love the feeling. 

It fantastic being in the feeling. I’ve got one eye on my alerts though. 

WHY?

We make our biggest mistakes when hit by Euphoria. 

Yes. 

Surprised?

Don’t be. 

Under the influence of Euphoria, our biochemistry is so, so different. 

We’re far from peak. 

Our defences are down. 

We are highly capable of plunging into…an abyss…oblivion…call it what you feel is befitting. 

We let go of safety. 

We bet big. 

We bet dangerous. 

We bet the farm.

That’s what euphoria can do to us. 

I do feel euphoric, at times. 

A trade’s gone well. 

A deal’s come through. 

Stability at home. 

Euphoria. 

However…

…as I told you…

…one eye is on my alerts. 

If even a single thought emerges of betting big, bigger than my normal size, well, my predefined red-alert also goes up with such a thought. 

I see my alert’s red flare, and the unwanted thought subsides. 

I am able to sick to within the confines of my position-size rule.

If even one thought emerges of trying a new untested line, just because all current lines are doing ok, well, my predefined strategy saturation alert also goes up with such a thought. 

I remind myself that I’ve decided upon financial strategy saturation, and don’t plan to add a new line, at least not in a hurry or upon an impulse. 

I’m able to stick to my strategy saturation decision. 

Are you understanding what I’m trying to tell you?

If yes, I’m so happy for you. 

You’re not leaving it for later. You’re understanding it without being hit by the aftermath of a decision taken under the influence of euphoria. 

Cheers mate!

🙂