I first published the below on my website www.sharechap.com Would welcome any thoughts or strategies from the Stockopedia Community on how to cope in the present market conditions.
Volatility is the enemy of the low risk trader and a friend to the gambler that likes action more than making money. Mark Minervini
I went to Spain three weeks ago. I was fortunate to get there owing to Storm Dennis. We were one of the lucky flights that escaped out of Luton on that gale-force Saturday afternoon. It was the bumpiest take-off that I’ve ever experienced and the turbulence was no fun. Whilst we were delighted to take-off and reach our destination, the ride was one to forget.
The recent Market action over the last fortnight has blown me off course in the manner of Storm Dennis. I had been planning to write* about different sectors to buy, the best approach to picking quality shares and why size matters. That will all have to wait. At present, the live Market commentary is too enthralling to ignore.
I wrote a review piece last month on the Art of Execution by Lee Freeman-Shor. The first bad habit that the author identified was that of the Rabbits. Chief failing of that category of investor was freezing and failing to act when their shares dropped. The more successful investors would either sell or buy in such situations.
In times like these, many of us turn into rabbits. When confronted with days of red screens and we see the values of our portfolios shrink by thousands, it is normal for a sense of dread and panic to descend over us. Equally when we see a couple of days of blue screens with spiking increases, a looming feeling of regret replaces that feeling of dread (“if only I’d got in last Friday!”) Finally, that lingering feeling of (let’s admit it) mild smugness when the Market steeply spikes down into the red again.
We hate loss as human beings. We are wired to avoid it. It’s a more acute feeling than greed and can be debilitating. I’ve met a few people who have dabbled in shares, lost money and then given it up as being too risky. Part of the reason for this is that people jump into shares without a plan to reduce their risk. That risk can be reduced materially if you buy the…
