Further Reducing My Market Exposure

by Olivier on January 25, 2010

After doing my research during the weekend I would have expected the markets and my two positions MRZ.V – Mirasol Resources and MXI.V – Merrex Gold to bounce today. It really comes down to being in sync with the markets and the stocks you are trading. Your personality needs to match a stock’s personality. In order to trade at peak performance and experience a flow state of mind where you can execute flawlessly, a stock needs to behave well. Forcing trades never generates great results. Put another way, a stock needs to trade the way you would expect it to trade. Whenever that’s not the case this raises a red flag.

A few reasons that come to mind why a stock doesn’t match your expectations:

  • You might not be trading well.
  • You are misjudging a situation.
  • The stock has a ‘weird’ personality.
  • The stock you are in simply turns out to be a losing trade.

That being said the markets and my two positions are not bouncing as expected and I don’t see any compelling reason to aggressively go long. Since the beginning of 2010 I have been very cautious and very conservative as far as my overall exposure to the markets is concerned. Missing an opportunity is never a problem. The markets offer plenty of them on an ongoing basis. What can hurt you though is big losses. Most of the time they happen due to greed. To be more precise, greed is simply a variety of fear. The fear of missing out on a stock moving up which by the way is closely related to to the fear of selling at a loss. If you want to be successful in the long run it is never a problem to miss out on a good move as opposed to losing money. That’s why I decided to sell a bit and further reduce my exposure. Long term readers know I do not send out newsletters when I trade around a position but post about those trades on my website. Still I decided to update my newsletter section for new readers.

The markets are very difficult to read and my gut feeling tells me it is a good idea to be very conservative. When I look back and visualize all the situations where I had the exact same feeling it turns out it often was during distribution phases in the market. Unless you are an active trader this is not the time where big money is made.

Better be safe than sorry. Avoid big losses at all cost.

Have a great evening!

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