When I’m in the red and stocks are declining I find it easy to average down as I’ve done my DD and believe in the stock, in my eyes I’m getting a better price.
When I’m 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, what’s your strategy?
I’ve 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 ‘doesn’t matter as I’m in this for the long haul’, 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 I’ve 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 won’t have 5% +/- swings on any given day, when there are headlines like covid cure etc…
There is always that annoying feeling of buying in bull run. You can always wait for the next dip but it doesn’t necessarily mean you’re getting the best price…if a stock goes up 50% - 100%+ in a couple of weeks/months you could wait for the next 15% - 30% dip however you’ll 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.
You’re 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 I’d end up with if I only bought during dips of a particular stonk.
Start off with €4,000 on 1st April 2020.
Split that €4,000 into 10 chunks of €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 €5,493.
or
Stick that lump sum of €4,000 into the stock on 1st April and do nothing, you’d have €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 it’s a sample size of one stock. But it was an interesting experiment and basically means just yolo now if you’re in for the long run, you’ll probably end up better off. As long as it’s 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 €400 exactly at the bottom here and there. Doing it “live” would be a headache and less accurate.
I think I’ll continue to add during the bull run but I’ll 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 I’ll sit back watch my stonks rise and wish I’d just left them…
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 I’ll feel like I have missed the boat.
The lesson I have learnt from gif is pull the trigger early
I’ve a got a couple that have ran up to a crazy level as it looked like a breakout was coming out on the MACD, I’m extremely new to this still so I thought I’d 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, I’m 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 it’s a bloody physiological nightmare when it’s green. That being said, imagine if you took the “because it’s green don’t add” mentality with a PayPal or Square years ago, you’d 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, it’s all about context. I don’t think I would continue to add to a more mature company, or say some the COVID recovery plays.
I even have a “Slow and Stready” pie which is as the tittle says.
The ones I’m 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 I’m thinking.
The the other argument is, should I take some
Profits? Another thing I’m bad at timing
Yeah I know what you’re saying, the position is so small it’s not really worth it yet, it’s only about 50 quid or so. I went into for the long run so it’s just an experiment really as people are notoriously bad at timing the market, especially amateurs like me.
Don’t get me wrong if it was 500 quid profit it would be another story.
As I’ve 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%? I’m 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 you’r in for the long run it’s better just to buy when you’r planning to buy (for me it’s almost always the 1’st of a new month, after bills ect are paid. And i mean it’s working out great
