Tonight I am posting an excerpt from one of my favourite books. Tony Oz: ‘The Stock Trader’. I loved reading it some 10 years ago. No fancy stuff, straight forward talking, objective observations and self-conversation of a real trader. There is a reason why it is part of my recommended trading books section. In the subsequent excerpt Tony Oz addresses several key issues that pose great problems for many traders out there. You guessed it. Nothing new under the sun. He talks about missed opportunities, fear, greed and the need to be right to name but a few. Enjoy the trading wisdom of a professional trader!
Tony Oz: ‘The Stock Trader – How I make a living trading stocks.” Page 163-164
[...] The thing that drives me crazy about traders is that they always tell you about a great pick they had, and how they have left so much money behind. It is always about how much money they leave behind. I used to participate in these conversations myself, and I would share my grief about the trades that got away from me. In fact, I would even do so unintentionally while teaching a seminar. Now, every time I am about to tell a story about a trade that got away from me, I take a deep breath, and I tell myself, “No one really cares!” As they say,”Misery loves company.” You might be in pain for letting a big winner go early, and you feel you have to tell the world about it. It is not going to get you anywhere. Stop feeling sorry for yourself. It is impossible to be right all the time. When you are right and you have not capitalized on being right, you are simply wrong.
One of my dear friends bought XYZ stock at 70. The stock went up to 85, and he sold it. He never told me he was in the stock prior to him selling it, and after the stock has already declined back to 75. He was so proud of himself, because he bought it at 70 and sold it at 85, especially after the stock dropped back to 75; consequently, he did everything right. He then said to me, “keep an eye on it and buy it if it trades higher than 85. I have a stop buy order on it at 85 1/2 myself.” I never really followed XYZ stock; however, every time I spoke with my friend he would say, “did you see XYZ stock today? It went up a couple of bucks. It is my pick of the year!” A few months go by, and XYZ stock took out the 85 level. It was now at 180. My buddy is glowing. “I told you, it is my pick of the year,” he says. XYZ goes up to 240 and announces a 3 for 1 stock split. “It is my pick of the year,” my buddy says. The stock ten folds, it was a great pick. My buddy was right.
No! He was wrong! Although he made a great call, he never bought XYZ back once it hit his buy target! It was his pick of the year, and he has zero dollars to show for it. Moral of the story, put your money where your mouth is. Do not use the “I should have done…” phrase. Only speak about your actions, learn from your profits and losses.
Sitting tight on convictions has its rewards, but only if you keep your stops.
- Tony Oz
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