Psychological Trading Hurdles (2) – I can’t resist a bargain.

It happens to me all the time! The market keeps throwing up fresh bargains! I never dreamed that these particular stocks would ever trade at this price. They are such quality stocks, and I’ve been waiting forever for them to be less expensive. Never to be repeated prices I think! You know you can’t foretell how long this opportunity will last, and I really don’t want to miss out when they are so cheap.

Quality stocks always bounce back sooner or later. The most profitable investors are those with the courage to be contrarian, and are prepared to buy when everyone else is selling. I have some shares in these companies. This is an opportunity for me to pick up more. I know it is a bit risky to buy in a falling market, but this bearish sentiment couldn’t possibly last too much longer. I have a medium to long term investment time frame anyway, and I am prepared to wait for the market to turn.

Sounds familiar! Certainly this is how I am so often inclined to think.

But such apparent “buying opportunities” present an increase in risk. Markets usually take longer to recover than we think. It can be an almost unbelievably protracted process. “Once bitten twice shy” can apply to investors who have sold their positions at a loss. As a consequence many stocks fail to recover all their loss and what they do regain can take so long it will sorely test the investor’s patience.

These are the times to take stock. I then often wish I had a better understanding of Fundamental Analysis to help me sort the wheat from the chaff. Whilst it can be more profitable to act early, the safer course is to be patient, and wait for an uptrend to emerge.

Categories: Trading opinion


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