Discussion in 'Trading' started by crgarcia, Aug 6, 2007.
Who lost the bull market (March-May) profits?
I have been a long term investor for many years mainly in Real Estate and trust deeds. On 9/11/06 I liquidated some assets and created a diversified long term index portfolio:
40% wilshire 5000 - VTSAX
5% russell 2000 - VTMSX
10 % Europe - VEUSX
5% pacific - VPACX
5% emerging markets - VWO
30% total bond fund - VBTLX
5% corporate bond fund - VWEHX
Up until last week I had unrealized gains of approximately 21%
By last Friday evening, 50% of those gains were reclaimed... I now have stop losses on all securities set to stop the hemorrhaging at my initial 9% investment goal...
2-weeks ago, all indications showed me the market may take a negative turn... and I "gambled" that the long term capital gain advantage would be greater than a "mild correction" of 4%
Well, end result.... $100K whoosh....
On the positive side.... I have learned the following:
1, It is better to pay the taxes then to hold long positions against the trend "hoping" the correction doesn't arrive too soon... a minor profit is better than a major loss!!!
2, The words hope, gamble, woulda, shoulda do not exist in trading...
3, Disciplined risk and money management are the Mantra!!
4, Never make a trade without a stop loss, exist strategy or trading plan ...
5, Paper trade until consistently profitable, develop a system and back test in all market conditions. Learn to read price action instinctively, and not rely on simple crossover techniques... (investools, OTA students be forewarned... the true education is in books and experience, not in a spam can)
6, Never confuse the terms Investing with Trading, they require completely different skill sets...
7, Never trade outside your abilities and experience level
The list goes on.....
Hopefully, my post may help other newbie "traders or investors" from making similar mistakes... This is a very competitive environment and for those entering it un-educated, you have a 99% chance of being devoured by the beast within you.... (everyone thinks that it is someone else's fault for failure, but our true enemies our ourselves... not the market)
Good luck and happy trading
2 months doesn't make a new bull market
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