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Sunday, March 9, 2008

Mistakes, Mistakes, and More Mistakes

Charles E. Kirk from The Kirk Report have said that trading is a game of mistakes and not perfections. There is some truth in that. I know a person who turned 25k into 2 million and lost it all. Then what about Jesse Livermore who commited suicide? You get the drift. And you don't want to be a Jesse Livermore, do you?

I have said that in a down market, do not chase stocks. Let it come to you. I know that it is best to invest for the long term. However, losing 25% of the position in the short term is hard to stomach. Even worse is losing 50% of the position. This is evident with a lot of momentum stocks, e.g. CROX, LDK, STV, STP, etc... and the list goes on.

In my country there is a saying that goes something like, "Light is bright and ink is dark." All that means is you hang out with the bulls in a bull market and you hang out with the bears in a bear market. If you hang out with the wrong animal, then you can get killed.

The problem with following someone's recommendation is that you don't know when the person sells. The person could have sold long time ago and you are left holding the bag. You have to be careful and know when you need to take profit or take a loss. Don't get stuck in the hold and hope mode.

Lastly, don't fight the tape. I know LDK is a great stock. Answer me this, if the stock was so great, then why did it fall from 60+ in Dec 2007 to a new 52wk low now? Why is everyone selling the stock? Wasn't Enron a great stock?

Trust me, I have got pulled into the solar euphoria as well. I think all the good money have been made and it might be hard money going forward. I got sucked into buying STP at 38, bought Apr15c for JASO, bough FSLR at 198, etc...

You have to leave out the emotion when investing. It's easier said than done. This is why Winace is so harse about his blog because he does not want anyone to post that is in disagreement and causes him to lose focus. As for me, I like to entertain different ideas and different point of views.

That's all folks.