When Iām in the red and stocks are declining I find it easy to average down as Iāve done my DD and believe in the stock, in my eyes Iām getting a better price.
When Iām in the green and prices are rising I find it hard to add more to my position.
This is a bit of a paradox but do others feel the same, whatās your strategy?
Iāve been top slicing some stocks a little and relocating in others which I feel are better valued. Looking at the likes of L&G I feel this stock is now coming up to a sell or I should at least bank 50% of my profit.
If adding to a stock on the rise I have two alternating approaches;
the careless ādoesnāt matter as Iām in this for the long haulā, buy at the next dip approach; or
the more studious dip buy approach, whereby I wait for the dip and the rebound and buy once the first green candle above the previous resistance level, which in theory then becomes a support, has been established
The choice of approach depends on the stock, how long Iāve been holding it and how long I intend to hold it for going forward.
The difference between nowadays and normal bull run, we have huge swings upside today then in week completely opposite, so I pick my investment very carefully.
I think when we exit this volatility, it will be lot easier to auto pilot dca, as you wonāt have 5% +/- swings on any given day, when there are headlines like covid cure etcā¦
There is always that annoying feeling of buying in bull run. You can always wait for the next dip but it doesnāt necessarily mean youāre getting the best priceā¦if a stock goes up 50% - 100%+ in a couple of weeks/months you could wait for the next 15% - 30% dip however youāll still be buying at a higher price compared to the start of the run.
Completely agree with this problem haha. When it was low I was so happy to drip money into Taylor Wimpey (average buy is 112p) but then it started going up and I have barely added to it, yet now its had a red day or two (down 2.5% today currently) I am like, oh maybe I can put more in soon haha.
Youāre right the stock will surely dip, but who knows when.
I went back on the charts to the first lockdown, at the start of this massive bull-run, and calculated how much Iād end up with if I only bought during dips of a particular stonk.
Start off with ā¬4,000 on 1st April 2020.
Split that ā¬4,000 into 10 chunks of ā¬400 to strategically invest into 10 juicy dips (usually when the stock price bounced off the 100 MA or 200MA) from 1st April to today. If there was no bounce off the MA for a while I just picked the next small dip.
You end up with ā¬5,493.
or
Stick that lump sum of ā¬4,000 into the stock on 1st April and do nothing, youād have ā¬7,880 today.
This is not a very scientific test, and may not be 100% exact as I was moving from the chart on T212 to excel to type in data for each chunk. Also itās a sample size of one stock. But it was an interesting experiment and basically means just yolo now if youāre in for the long run, youāll probably end up better off. As long as itās not a penney stock or bankrupt oil company or something. Also less effort too trying to time the dips.
Also I had the luxury of seeing all the dips laid out in front of me, sticking ā¬400 exactly at the bottom here and there. Doing it āliveā would be a headache and less accurate.
I think Iāll continue to add during the bull run but Iāll split my contributions accordingly throughout my portfolio not to heavily skew ones average price. Im also going to set price targets and put rules in place to take out any emotion or attachment to a stock.
Then Iāll sit back watch my stonks rise and wish Iād just left themā¦
I know that exact feeling lol trust me I do the same sometimes, but then that same stock might go up around 2% to 5% everyday for the next few weeks/days and Iāll feel like I have missed the boat.
The lesson I have learnt from gif is pull the trigger early
Iāve a got a couple that have ran up to a crazy level as it looked like a breakout was coming out on the MACD, Iām extremely new to this still so I thought Iād just get some skin in it whereby I purchased around 3-4 in each day. They have ran up a crazy amount and I do want to add to them, and also hold for the long run, Iām just going to wait for a short term trend reversal and then top them up, only by another couple of shares in each.
But to answer your question itās a bloody physiological nightmare when itās green. That being said, imagine if you took the ābecause itās green donāt addā mentality with a PayPal or Square years ago, youād be kicking yourself.
Hahaha I know. Think like with everything the true answer is somewhere in the middle. If you think a correction is due monitor and maybe top slice a bit once a new price range is reached or established then maybe consider extending your position. Important aspect is to differentiate between a growth and recovery play as history will tell us a reasonable price for a recovery stock so we do have a reasonable assumption at what price to sell.
Yeah exactly, itās all about context. I donāt think I would continue to add to a more mature company, or say some the COVID recovery plays.
I even have a āSlow and Streadyā pie which is as the tittle says.
The ones Iām waiting for a reversal on are Palantir and Lordstown, both very risky hence the small position. That being said in a week one is up 63% and the other 50%, hence the pullback I am expecting. Next week Iām thinking.
The the other argument is, should I take some
Profits? Another thing Iām bad at timing
Yeah I know what youāre saying, the position is so small itās not really worth it yet, itās only about 50 quid or so. I went into for the long run so itās just an experiment really as people are notoriously bad at timing the market, especially amateurs like me.
Donāt get me wrong if it was 500 quid profit it would be another story.
As Iāve said in the past global stocks are so far down (mainly) that they can only really go up short term, I know many of you disagree but if not where will they level out? 40% down 50%? Iām looking at February charts and seeing a lot of ground that needs to be caught up with. Also seen as all of our currencies are weaker due to the printing thats been going on surely the markets will have to grow to absorb inflation?
If youār in for the long run itās better just to buy when youār planning to buy (for me itās almost always the 1āst of a new month, after bills ect are paid. And i mean itās working out great
