I’m not tagging tickers. Only those that follow me will see it in their feed
This might be the most important post you ever read in your investing career. Or it might not mean shit to you. And it may come across as a bit harsh and judge mental but most of you so-called investors are pretenders. When I see loss porn positing of losing 70% on a ticker, it makes me I’ll. The greatest retail disadvantage compared to the institutional side is one that self imposed by retail upon itself. It’s the inability to take advantage of movement in either direction to yield gains. I call it longitis . It’s a trader that has a trading program limited to only making gains from buying low and then selling high. This lopsided sickness often comes with a physical handicap called diamond hands used in a strategy of holding a declining stock and believing that you only lose if you sell. I will destroy these myths that cause tremendous losses. This disadvantageous strategy of longitis in a bull market makes substandard returns at best. And in a bear market, like we may already have in small caps, it’s by definition a guaranteed way to ensure realizing loses.
I’m going to first explain the handicap of longitus and then I’m going to give a suggestion on an exercise to help overcome the malady.
LONGITIS the portfolio killer:
a successful trader realizes that holding a stock as it drops in value represents a loss just like not holding a stock as it rises does. I’m always baffled by the recommendation of when prices are dropping that you should hold and that you only lose money if you sell. If you consider not taking advantage of potential gains as being a loss than the truth is when a stock is in a downtrend and crashing you only lose money if you don’t sell. Here’s an easy example to demonstrate it. You start with 1000 shares that are one dollar each and as the stock is falling you sell after 10% loss at $.90 per share and you have $900 cash. When the price drops all the way to $.60 a share that $900 will purchase 1500 shares. When the price of the stock recovers to one dollar your portfolio is now worth $1500 instead of the $1000 for the person who held on the way down and back on the way up. Even when you calculate capital gains at the highest short term rate of 40% you still end up way ahead and it’s important to note that doing this is not what the “wash rule” relates to. The truth is that any time you sell and you re-purchase at a lower price you realize owning more shares. Those additional shares translate into additional dollars when the share price rises. This is essentially poor man shorting. People think you must buy low and then sell high to make money and they ignore 50% of the potential gains which are in the other direction. Sell high first AND THEN buy low creates gains just the same. But because retail investors only think in the long terms they don’t realize that holding a stock as it drops is taking a loss. They get really anxious about selling and then maybe the stock goes up which is not owning a stock as it rises but they don’t see that holding the stock as it drops is just as bad. Buying dips and cost averaging down are terrible investing strategies considering the alternative. Mathematics simply suggest that if you sell in a downtrend you realize gains. You can even increase your gains as illustrated in the 1000 share example if you employ a put buying strategy as it falls as well. Doing that yields even more than the 1500 shares in the previous example. So the secret is to know when the reversal is happening because the word dip implies coming back up. But what people called buying on the dip is just buying on a downtrend. I wasn’t involved in the Kodak circuit breaker buying fiasco but I helped a friend who was. I directing him to sell immediately in that crazy July 2020 day and he was lucky to get $32 and he paid $56. But by buying puts with that $32 as it continued to trend down all the way to seven dollars, he actually ended up with larger gains then had it just stayed up at $62. So I’m not sure why the conventional wisdom during a crash is to not panic sell, when that’s exactly the move to take to minimize losses and maximize gains. And the thing that causes people to not employ the strategy is their fear that if they sell instead of dropping it will rise. And yet they have no problem with holding the stock as it drops in price. And they’re both equally bad.
SUGGESTED EXERCISE TO GET COMFORTABLE WITH MAKING GAINS IN BOTH DIRECTIONS
There is a tremendous resource that moomoo offers on the platform called paper trading and you can practice with the stocks and options but the oneI recommend to get comfortable with making money on falling prices is the futures paper trading. They give you 10 million to start and basically to open a short all you do is have your first move be selling the asset. These short positions are reflected by the negative sign in front of the amount of futures contracts your account has. And if you think this is me trying to brag about turning my 10 million into 83 million, you’re damn right I’m bragging. That’s a real NFT right there that can’t be Fabricated unless you work for FUTU. I have a history of over 600 transactions going long and short on everything from soybean oil to Indian rupee to US dollar currency to lean hogs to platinum. I have realized gains of $73 million on about a quarter billion worth of transactions. That’s over 30% return rate.
Go open your free account and start buying and selling futures. Make a bet oil will rise. if it doesn’t close that position and open a short. As long as there’s movement there’s money to be made. You are a shitty investor if you only go long. ignoring where up to half of all possible returns lay. It’s not that hard. If you think the price is dropping then you sell to open. If you think the price will rise you buy to open.
This going long and short in futures will translate to your trading stocks career but it requires you develop the capacity to either open a short position, which moomoo helps provide you with shares to do so, or buying puts. even just liquidating on a downtrend works. Cut your stupid diamond hands off like Hannibal Leckter did to his one hand. If you are to retarded to learn of to short or buy puts, simply stopping the stupidity of holding a declining stock will get you gains as we demonstrated. Start selling a stock and not holding it as it drops followed by a reentry into the stock when you believe the bottom is in is the most primitive way to overcome longitis. but by simply doing that it gives you the probability that you will have better returns on your investments than all the other retail idiots still suffering from longitis .
I’m going to first explain the handicap of longitus and then I’m going to give a suggestion on an exercise to help overcome the malady.
LONGITIS the portfolio killer:
a successful trader realizes that holding a stock as it drops in value represents a loss just like not holding a stock as it rises does. I’m always baffled by the recommendation of when prices are dropping that you should hold and that you only lose money if you sell. If you consider not taking advantage of potential gains as being a loss than the truth is when a stock is in a downtrend and crashing you only lose money if you don’t sell. Here’s an easy example to demonstrate it. You start with 1000 shares that are one dollar each and as the stock is falling you sell after 10% loss at $.90 per share and you have $900 cash. When the price drops all the way to $.60 a share that $900 will purchase 1500 shares. When the price of the stock recovers to one dollar your portfolio is now worth $1500 instead of the $1000 for the person who held on the way down and back on the way up. Even when you calculate capital gains at the highest short term rate of 40% you still end up way ahead and it’s important to note that doing this is not what the “wash rule” relates to. The truth is that any time you sell and you re-purchase at a lower price you realize owning more shares. Those additional shares translate into additional dollars when the share price rises. This is essentially poor man shorting. People think you must buy low and then sell high to make money and they ignore 50% of the potential gains which are in the other direction. Sell high first AND THEN buy low creates gains just the same. But because retail investors only think in the long terms they don’t realize that holding a stock as it drops is taking a loss. They get really anxious about selling and then maybe the stock goes up which is not owning a stock as it rises but they don’t see that holding the stock as it drops is just as bad. Buying dips and cost averaging down are terrible investing strategies considering the alternative. Mathematics simply suggest that if you sell in a downtrend you realize gains. You can even increase your gains as illustrated in the 1000 share example if you employ a put buying strategy as it falls as well. Doing that yields even more than the 1500 shares in the previous example. So the secret is to know when the reversal is happening because the word dip implies coming back up. But what people called buying on the dip is just buying on a downtrend. I wasn’t involved in the Kodak circuit breaker buying fiasco but I helped a friend who was. I directing him to sell immediately in that crazy July 2020 day and he was lucky to get $32 and he paid $56. But by buying puts with that $32 as it continued to trend down all the way to seven dollars, he actually ended up with larger gains then had it just stayed up at $62. So I’m not sure why the conventional wisdom during a crash is to not panic sell, when that’s exactly the move to take to minimize losses and maximize gains. And the thing that causes people to not employ the strategy is their fear that if they sell instead of dropping it will rise. And yet they have no problem with holding the stock as it drops in price. And they’re both equally bad.
SUGGESTED EXERCISE TO GET COMFORTABLE WITH MAKING GAINS IN BOTH DIRECTIONS
There is a tremendous resource that moomoo offers on the platform called paper trading and you can practice with the stocks and options but the oneI recommend to get comfortable with making money on falling prices is the futures paper trading. They give you 10 million to start and basically to open a short all you do is have your first move be selling the asset. These short positions are reflected by the negative sign in front of the amount of futures contracts your account has. And if you think this is me trying to brag about turning my 10 million into 83 million, you’re damn right I’m bragging. That’s a real NFT right there that can’t be Fabricated unless you work for FUTU. I have a history of over 600 transactions going long and short on everything from soybean oil to Indian rupee to US dollar currency to lean hogs to platinum. I have realized gains of $73 million on about a quarter billion worth of transactions. That’s over 30% return rate.
Go open your free account and start buying and selling futures. Make a bet oil will rise. if it doesn’t close that position and open a short. As long as there’s movement there’s money to be made. You are a shitty investor if you only go long. ignoring where up to half of all possible returns lay. It’s not that hard. If you think the price is dropping then you sell to open. If you think the price will rise you buy to open.
This going long and short in futures will translate to your trading stocks career but it requires you develop the capacity to either open a short position, which moomoo helps provide you with shares to do so, or buying puts. even just liquidating on a downtrend works. Cut your stupid diamond hands off like Hannibal Leckter did to his one hand. If you are to retarded to learn of to short or buy puts, simply stopping the stupidity of holding a declining stock will get you gains as we demonstrated. Start selling a stock and not holding it as it drops followed by a reentry into the stock when you believe the bottom is in is the most primitive way to overcome longitis. but by simply doing that it gives you the probability that you will have better returns on your investments than all the other retail idiots still suffering from longitis .
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
I block accounts with no name, pic, trading history or posts that try to follow me. Sorry hedges
1643Followers
220Following
10KVisitors
Follow