7 Let me clear my throat….
I am here tonight, to talk about the difficulties that I, no doubt, share with others in this realm. In the halls of IBC, we are surrounded by traders and investors of considerable talent. They share with us, on a daily basis, their picks – and I applaud their charitable ways. However, I advise many citizens of IBC to take caution. It is extremely difficult to have real conviction in a thesis or call that is not your own. And when you find yourself in a situation where you lack conviction, you are prone to indecision, and ultimately failure. That isn’t to say that you can’t make money off of the calls of others and pick up some invaluable knowledge in the process. But take care not to wake up one morning, only to find your metamorphosis into a remora fish complete.
My advice: have a strategy. Make that strategy your own. Test it under live fire conditions with small positions. Learn to believe in it. If you find, that over the course of a market cycle, your strategy begins to fail consistently, experiment with something else. In the end, it’s real conviction that will earn you real money.
The Fly consistently shares ideas in which he has great conviction. While I have the utmost faith in the ultimate winship of Le Fly, it’s only natural that I find it’s in those stocks where I have the most difficulty succeeding. Let’s examine my own performance in a few of Fly’s recent “public conviction” buys.
WNR – Horrific loss. I sold on the gap down to $12 on earnings, prior to the start of the conference call.
GSVC – Horrific loss. I couldn’t have bottom ticked this one any more perfectly
TZA – I know this is technically a PPT systems trade, but I consider a direct product of the the good doctor’s brain. At any rate, my trade in this case was another horrific loss
YELP – In an attempt to learn from my past failures, I made painstaking preparations prior to my first YELP purchase. First, I entered a small limit order for my initial purchase. Second, while I was waiting for that order to execute, I hooked up an IV of Jack Daniels mixed with liquified crystal meth. Imbued with liquid courage, I added fearlessly (well, almost fearlessly) as dark clouds emerged over the entire social media space. I still plan to add more – hopefully on strength – to this position, which currently represents a loss of over -15%. The good news is that my emotions are completely in check because of the manner in which I approached building the position. I allowed myself to become comfortable with holding YELP over time, much like a deep sea diver adjusts to a long slow decent underwater. Had I added too quickly, I’m sure I would have had a case of the bends.
In short, I applied my own strategy to building a position in the Fly’s pick. And while not a perfect approach, I think that improves my chance for success. Bring on the month of June and the historical weakness that comes with it. I’ll be ready.
Conviction, my friends. It’s the word of the evening. And with that, I’ll leave you with a remix of a popular poem that pertains to the subject at hand
7 Responses to “Footprints”
zenhunter
Conviction without a trading plan to limit loss is just as deadly.
At what point does conviction become a “marriage” to the stock? In other words, will you get out at certain point or will it be a “until death do us part” scenario?
Conviction cut both way…
Fidel Cash Grow
Good point Zen. When following my own rules and identifying my own picks, I typically set stops at near term support and stick to them. I’ve actually found though, that holding someone else’s pick, and having it go against me, makes me a little sloppy about setting stops on my other positions. I find the emotions one experiences while trading to be fascinating and deadly. While i should have been more clear, one of my points was that applying elements of your own philosophy to someone else’s pick can help you build conviction in the name. But you should definitely set your downside limit before entry if possible. Also wanted to mention that I enjoy your posts.
zenhunter
Fidel, good to know you have a trading plan. And thanks for reading my posts. I enjoy reading other members’ posts as well.
Cheers!
redman59
Nice post, everyone has their own risk tolerance and if you do follow one’s picks you have to follow your own risk. I like to use social media and even paid subscriptions. Buy following these I know my risk and if the picks don’t follow then don’ trade. Yes you may miss out on some awesome trades but if you can sleep at night and trade your plan and be happy then you are on the right path.
Fidel Cash Grow
Thanks redman. Left a comment for you on your “Managing Millions” post. Do you employ a longer term strategy with a particular bucket of money? Or do you actively manage it all?
redman59
I trade with more money through my LLC than I manage for my retirement through my employer. But the employer is limited to what funds to trade and for that I employ longer term strategies. I recently wrote 2 posts on SPX Timing strategies and these are what I use.
http://ibankcoin.com/redman59/2012/05/21/spx-timing-on-the-simplest-levels-the-one-i-recommend-to-friends/
http://ibankcoin.com/redman59/2012/05/21/one-for-the-friends-simple-spx-timing-strategy/
Don’t know if you read them but they are really basic, yet effective. But overall I guess you could say I manage both but the LLC is the more active day/swing trading type of account.
ultramarine
On the GSVC position, when did you buy and sell that? I remember Fly selling all his GSVC back in January. Soon after that, Fly posted notes (in the PPT) warning about a secondary offering in the works that I assume would dilute the share value.
Just as a thought, if one is going to follow Fly’s (or anyone’s) conviction plays then probably best to follow his trades closely, when he both gets in and out, and also watch for his notes on the securities in the PPT (if he posts them).
If anyone doesn’t know, if you are a PPT member then you can sign up for Fly’s email trade alerts and get his buy/sell activity right when it happens (full disclosure: I’m a PPT member, but getting no compensation for this post – other than ibankcoin currency).