What Does It Take To Catch A 100% Move In A Stock?

You can’t catch a 20% move in a stock if you are not willing to lose 5-6%. This is often a normal pullback within many 20% moves. Sometimes, stocks that pull back 5-6% from your entry won’t recover and you will have to book a loss as a swing trader. It’s Ok. Being wrong is often not a choice. Staying wrong always is.

In the same line of thought – you can’t catch a 100% move in a stock if you are not willing to go through a 20% drawdown. Note that I say a drawdown, not a loss. Two different things. If you time your entry properly, you should never let your position drop more than 5-10% below your purchase – depending on the situation. Once your position is up for the races and you are already profitable on it, 10-20% pullbacks are often normal. Riding big long-term winners often requires going through deep pullbacks. Not everyone is willing or could stomach a 20% drawdown in individual positions. This is why not everyone could catch 100% movers. The good news is that you don’t have to if this is not your style. You could achieve just as good (and often even better returns) by going after multiple 10-20% short-term movers than by chasing unicorns. There is not right and wrong approach here. Both approaches could be very lucrative. Both could be practiced by the same investor. What you need to realize is that each of those market approaches requires different state of mind.

Dr. Brett Steenbarger On How To Become A Better Trader

Brett Steenbarger is one of the most consistent and prolific financial writers, who is also a trader. I highly recommend following his blog TraderFeed and reading his books on trading psychology. Here’s a recent take of his on one way to develop your trading/investing acumen:

Find the people who most consistently come up with the most original and useful observations and ideas, study their thought processes (how they’re generating those ideas), replicate those ways of thinking for yourself, and take the time to begin thinking like them.  Imagine doing that across many virtual mentors over time so that you begin to integrate the best thinking of the best people.  That is how imitation turns into innovation.  

Take a look at who you’re following in social media.  If you’re spending much time reading material from those you don’t want to internalize, you’ll wind up with little cumulative development.  A great exercise would be to curate the $STUDY stream of StockTwits and immerse yourself in the educational offerings of only those you’d like to emulate.  

Keep reading here

 

Being a Contrarian Doesn’t Always Work, but When It Does the Payoff is Ginormous

They say that two types of people are the most dangerous in the stock market: those who know nothing and those who act like they know everything. The more important question is, who are the types of people that make the most money in the stock market? I would say they are those who have a very good understanding of how markets work and those who end up being right about something about which the majority of people are wrong.

If you want to achieve outsized returns, you have to do something that most people are not willing to do. If something feels psychologically difficult to do in the stock market, it is often the right thing to do. If it were easy, everyone would do it, and therefore the end result would not be anything spectacular.

Doing something that is psychologically difficult does not guarantee you success, but it does guarantee you outsized returns if you end up being right. The only way to make big money is to be right about something about which almost everyone else is wrong. If you are right about something about which everyone else is right, you will only achieve average returns. Sometimes being average is not a bad outcome, but we are striving for more than that, right?

What are some of the signs that other people are not on the same page as you? They will tell you. Your idea will seem so ridiculous to them that they will make fun of it. You know what? This is a really good sign. It means that you are onto something big. It means that if you are right, your payback will be huge. Being a contrarian doesn’t always work, but when it does the payoff is ginormous.

This is an excerpt from my new book – The Next Apple: How To Find Stocks That Could Go Up 1000%