Before you start humming the 1996 hit song by Oasis, take a look with me at yesterday’s closing price of stocks I sold this month. I sold TSE:FVI shares @2.59, it closed above 2.80, and I sold Fr @3.30, it closed above 3.60.
I picked these stocks for the right reasons, I am confident that in the long term, they will be closing much higher than these prices. However, there comes a time when you spot new opportunities in the market, you pick one of your winners and sell locking in your profit in order to move into 1 or more stocks ready to repeat the cycle.
What happens in the following day(s)? The stock you sold moves substantially higher on no news while the new ones sit there doing nothing. Mr. Market you did it again; I thought you were paying me a good price for my stocks. You turn around and make me feel cheated with all my lost potential profits.
OK, I should take it easy on Mr. Market. Who forced me to sell? No body of course. I sold because in my perception the price has had its run and the party was over. I sold because it was part of my trading plan. Well, I guess my timing was wrong.
It’s gotten to a point where every time I sell, I go through 3 emotions:
- I stress because I expect the price to keep rising the next day, I keep on looking back.
- I am angry because I didn’t sell close to the high of the day price.
- I feel that I am throwing away a great company, as if I’m breaking up with a great girl!
Close that emotional window and open the logical one, I need to keep drilling some basic facts into my head:
- You can never time a stock.
- Moves never last forever.
- When to sell for a profit is harder than buying in.
- When to cut your losses and sell is the hardest.
- Stick to the trade plan or you plan for failure.
- Save your love and warm feelings for family and friends.
- Stocks will never owe you loyalty.
I need to write these facts on a board every morning before the market opens!
In my case, I still got out with a profit; I would not want to know how it feels like had I sold at a loss and the stock took off the next day.
Not looking back emotionally after selling is a guideline I typically fail to observe. I guess it is human nature, the curiosity to look back, just like wondering what ever happened with your ex-girlfriend years after breaking up. It was not the first time I held these stocks and probably will not be the last time.
I need to remind myself that what counts is to keep losses minimal and maximize profits. Keep the focus on the research at hand and avoid lamenting over lost potential profits, after all knowing me, I would’ve sold way before we would have hit yesterday’s prices. I am a disciplined seller, after all I am hitting the sell button and executing my plan, it’s the emotions that I have to control and subdue. With time, it should not be a problem since I am on the right path.
How about you, do you have the discipline to sell and move on without looking back?