Why You Need A Plan For Buying ASX Stocks
They say your biggest regrets are not what you do, but what you don’t do. And do you know what? I agree. It’s the opportunities I let go that linger longest in my mind.
Take the stock market for instance. Do you ever hesitate to buy after a quick share price rise?
Many people do. You’ll hear them say ‘I’ve missed it’. They then watch as the shares spiral to dizzying heights, all the while kicking themselves for not buying.
Don’t worry if you’ve done this. I have too — many times.
You see, I’ve always been good at buying a breakout. This is when a stock busts higher after a period of trading quietly. Many big trends start this way.
My problem was buying if I missed the initial move. I’d start worrying about a pullback instead of trusting the trend. It was a case of getting in on the ground floor, or not at all.
An example was near the end of the GFC sell-off. I’d been following the market closely. I thought a major turning point was coming, and I was ready to buy.
Check this out:This is a chart of the S&P 500. The market hit a new low in November 2008. But then quickly began to rally. I thought this was a sign the tide was turning. So I bought two big parcels of shares in an index fund. You can see my entry points on the chart.
But I was too early. I cut my trades shortly after, as the market took another turn lower.
Here’s what happened next:The market made a final low and began a sharp move higher. The S&P 500 rallied for six straight weeks, and put on close to 30%. This was one of the strongest rallies in history.
But I wasn’t on board. You see, I hadn’t seen a clear point to get back in. By the time I knew I should buy, I balked at the higher price.
Here’s the final chart in the series:
It still bugs me to think about. I had the right idea. All I had to do was re-enter the trade.
But I didn’t act. Regrets, I’ve had a few.
Thankfully, it’s not all bad. Regret also has a positive side. For me, regret is the incentive not to repeat a mistake. This has made a real difference to the way I trade.
Next week, I’ll show you what I mean. You’ll see a stock that could have easily gotten away. But thanks to past regrets, it’s been a highly profitable trade.
I’ll also tell you how I use regret to weigh up a situation. This has had a big impact on how I enter a runaway trade. I think you’ll find it interesting. You’ll be able to use this tactic yourself.
So that’s all for this week. If you liked this video, or even if you didn’t, scroll down and leave me a comment. And let me know if there are any trades you regret not taking. Also, if you’re watching this anywhere other than my website motiontrader.com.au then head over and have a look.
Until next time, I’m Jason McIntosh, and let’s find some trends this week.
I'm Jason McIntosh, the creator of Motion Trader. My career began in 1991 on the trading floor at Bankers Trust. Nowadays, I trade my own systems from home in Sydney.
Motion Trader is for investors who value robust analysis, data driven entry and exit signals, commentary, and education. I use engineered algorithms to identify when to buy and sell ASX stocks. No biases or guesswork, just data driven signals.