4/22/2021 Update on NIO and M long positions (2:25PM eastern time at initial writing of post).

Hi everyone. I didn’t sleep very well and watched the stock market this morning/afternoon to keep myself awake. Some interesting things I noticed are as follows.

  1. I got a huge urge to sell NIO at 38.8 mid day after the Biden news. I had a plan to sell before market close if we closed below 39. I still have the bad habit of getting too emotional and wanting to sell before my profit exit is hit. It seems like this only happens if the price swings violently in my favor and puts me at large unrealized gains. It could also be that NIO was ~50 cents from my pre-planned profit exit at 41.
  2. I’m still too attached to the unrealized gains on my positions. I do very well cutting losses and haven’t pulled a stop loss for over 2 years, but struggle with holding very large winners (3+ times my risk on the trade).
  3. I can either adjust my trades to have lower risk to rewards (like 1 to 2) to focus on my strength of cutting losses quickly and having shorter trades, or I can learn to hold longer for larger winners (higher risk to reward) to improve my weakness. I don’t know which is correct, but I want to experiment with higher risk to reward ratios.
  4. I didn’t have the urge to sell M for some reason. I think it’s because the stock has much longer until the next earnings report (~3 weeks) and is also very far from my profit exit. NIO has earnings in about a week, so I have to be out of the position by then.

The conclusion here is I refuse to touch these positions unless it hits my stop loss / profit exit or earnings are the next day. In fact, it’s probably best I don’t even check the stock market until the end of each day (or at all). This makes it so I can’t panic sell.

Even if I lose lots of money on these trades, I need to build the habit of dealing with giving up a large amount of my unrealized gains. This will make me a better trader, and will help tremendously in the long run. After all, most of a trader’s dollar amount gains are in the later years (when they have a larger account from compounding). For example, the dollar amount gained from 3% on a 10 million dollar account is far more than gaining 3% on a 1 million dollar account.

If I get scared now and can’t make the adjustment, I’ll never be able to improve. I just have to keep telling myself that small changes and adjustments compound, just like in real life 🙂

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