How to Control Panic and Stress in Trading and Investing
Posted on October 13, 2018
With panic growing amongst investors as global indices experience their worst consecutive declines since May, I wanted to kick things off with a quote from the iconic boxer of my childhood, Mike Tyson. Paraphrasing; “everyone has a plan, ’till they get punched in the mouth”. Its all well and good being long momentum and the stock market darlings when things are calm, but when "Iron Mike” starts swinging, you see very quickly who has the conviction in their process to stand their ground and roll with the punches (those with a 'weak chin’ in trading terms end up on the canvas).
Earlier in the week I presented the latest video applying the Company Analysis Checklist that Lex and I use to analyse stocks and be on the front foot when we enter the proverbial boxing ring with other equity traders. This time, we looked at Walmart, a stock which we first featured in May and analysed as a potential long idea back at $83 (the stock bottomed later that month at $82.40, before rallying to $100 in little over 3 months). With us clearly ahead on points in boxing terms, I decided to produce a follow up video to see whether this trade could go the distance, or whether we should look for the knock out blow to exit our position (for the benefit of readers, I’ll stop with this rather stretched analogy now!).
We follow a 5-step approach when analysing any company, as Lex taught his students in the Million Dollar Traders TV series, and outlines in our namesake MDT Online Course. It begins by reviewing a company’s management, before considering the products it sells, as well as the financial health, valuation and geographical exposure of the business. The screenshot below provides a glimpse of how we go about scoring this systematically in Excel using our Checklist model.
By following this process and understanding the reasons for buying or selling a stock, we remain objective and never panic when others around us are losing their cool. Trading is like little else when it comes to stirring the primary emotions of fear and greed in humans, and it ultimately provides the acid test of any investment strategy and the resolve of the person operating it. Just make sure you heed the words of the former undisputed heavyweight champion of the world and don't trade without a plan the next time you go up against the market.
Join us today and do not hesitate to contact our team with any questions you may have regarding our Online Course and Trading Club access (NOTE: we have extended our 50% sale on the MDT Online Course! Discount code: HALFTIME).
Wishing you a knockout weekend!
James Helliwell | Chief Investment Strategist
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