When it comes to trading, there is always one thing you can count on: the mood and temperament among investors and traders changes as quickly as the wind. Blow too hard in one direction, and the result can be very damaging to your wealth and your mindset.
Certainly, the unknowns out there are the challenges we have to either dodge or just embrace. If you have a long-term horizon, the bumps in the road become great opportunities to jump in and add positions. That has always been what we did in the past – buy the dips and just hold until … whenever. I won’t argue that this is no longer a winning strategy, but I have noticed much less confidence during dip buying.
This is puzzling, because there are not often superb opportunities to get in on the ground floor of a company ready to blossom. A lot of traders just don’t believe the name will move up here, and they shy away, only to regret not getting on board.
Remember when Google went public in 2004 – at $104? Now it’s over $1,000 a share (split adjusted). Ebay went public in 1997, and it’s also up a massive amount since then. Facebook, which had a disastrous IPO, is now one of biggest companies in the world and has doubled in value since the IPO, rocketing nearly four times above the lows reached in 2013.
How about the great franchises Visa and Mastercard? They are up massively since they went public. LinkedIn has also done very well. There have definitely been some busts like Twitter (so far), but generally speaking, if you held on to a new stock, you were rewarded.
What about you? Did you buy any of these names early and then ditch them at the first sign of what you thought was potential trouble? Do you regret it today? This is the danger of falling into the typical trader mindset. If you have a plan, stick to it.
Let’s talk about some newly issued stocks for a moment, because a lot of new companies have recently come on the market but the confidence in them is really lacking.
Take Juno Therapeutics, a small player in the immunotherapy field that has made amazing discoveries. Jim Cramer talked about it on Mad Money prior to its IPO, and if you don’t know his great track record with biotech, then you are not paying attention. On day 1, it was at $38 a share – and I bought some. I think this is going to be a home run play, so even when it rose to the low $60’s I did not sell. Why? Because the short term gains will be paltry compared to where I believe the stock is headed.
We hear all the time this is not your grandfather’s market, which is a useless statement. We have to react to the market, not let the market make our moves for us. The game hasn’t changed, it only got faster with more participants.
Now, as an options trader, my focus is short- to medium-term; I never fall in love with anything I trade. Everything is fair game, but for a longer term portfolio, I cannot think in this fashion. My mentality has to shift as the timeframe shifts.
What’s interesting, though, is that some traders have been asking me what to do with Juno. Trade it? Hold it? To that second question, the answer is YES.
Do you want to know how to trade stocks and cash in on big winners?
Don’t lose sight of how the big money is made – buy the BEST and hold for the big gains. Isn’t that how Warren Buffet and William O’Neill made their fortunes over the years? If it works for them, then why can’t it work for you?