Saturday, November 25, 2006

Fear & Greed.

My number 2 topic is dealing with the natural occurrence of Fear & Greed. The feeling of both, come from your brain. Everyone encounters it many many times in their lives whether they're aware of it or not. Numerous books have mentioned it and I have dealt with it before. (esp in terms of the stock market). Therefore I felt the topic must be delivered to you.

Here is a quick background of one of my past experiences with Fear-

A while back, when I first became a trader, I bought shares from a company called Chesapeake Energy (ticker symbol= 'CHK'). I bought a few shares at $34. (Back in Sept of '05.) I held my position for about a week. It was hard to check what was happening during the day because of school and sports. So really, all i had was an hour or so before the market closed to check up on it. I did have my stop orders in in case something were to happen. Basically, I wanted to see what really happened in the case of "buying stock." (Keep in mind, this was in my REAL Scottrade account.) I let it ride a few more days from the day i purchased the shares and it moved up and down a bit. Nothing to scare me. But when the stock bounced BELOW the price i bought it, Fear kicked in and I jumped to conclusions!

I immediately sold for market price which was $31.79. You're thinking, yea that's not a big loss at all! Now, i look back and realize the same thing, but it's those lessons you learn early on that make the big difference in the end. Add in my $7 commission, and it was a small deduction from my portfolio's total.

In the next few days CHK hits $37. I became slightly angry. It happens. That's one loss, BUT, lesson learned- DON'T JUMP TO CONCLUSIONS! Give the stock a chance. It will bounce up and down, but you must learn to work with it. As you learn the ropes of investing, you will start to realize other indicators that will inform you what the stocks patterns are.


On the other hand, Greed, is the total opposite idea of Fear. The stereo-type of investing is getting rich, or already being rich. To be honest, that's not close to being right. The market can either make ya or break ya. Greed seems to be the main reason people loose in the market. You get too anxious to "get rich quickly" and end up failing miserably. It will happen, again, to everyone.

A good example of this was a purchase I made of Lucent Tech (LU). I bought in, thinking yea, the technology sector looks good and strong. It was at the time, little did i know, being TOO over-confident would break me in the end. The stock did well for the first couple days, but then i started realizing something. The movement per day was a little upswing, then closing with a strong downtrend. I thought, "well, cheap stocks like this one can make me alot of money, esp how much it moves per day. I know this will turn around, just give it some time."

It killed me. I held on TOO long and was way over-confident with my decision. Again, you learn from your mistakes. But to be able to prosper in the long run, you must learn, and execute properly.

Don't get too drawn into a stock or stocks. Anything can happen! No one knows what the market will do. Therefore, take matters into your own hands and use your best judgement.


Summary of what to remember-

  • Don't jump to conclusions.
  • Give your stock a chance to do something. If the price falls a bit, know of an exit plan. You will make money, and you will lose money. It happens.
  • Don't get too caught up in a stock. Anything can happen!

Good investing everyone!

Questions? Comments?

Sunday, November 12, 2006

Bringing the old Blog back..

Its been a while. The idea of blogging slowly faded as I became more and more involved in school clubs, sports, after school activities and overall, academics. I give my up-most respect to those who can maintain a blog so well, keeping active and constantly brainstorming new ideas. Good luck to all.

Well, I'm not here to preach about others, after all I did just get home from church. Anyways, so far this blog has (Hopefully) taught you a small definition of what the stock market is and the significance behind it. I have yet to elaborate more in-depth of the major issues that the market holds. I feel, in order to get the points across in the best possible way, it takes many many small, short steps.

"The journey of 1000 miles begins with one step."

Before I get too carried away and off topic, my goals to this blog in the future is dealing with not only lessons of the market, but also what's going on in today's society and major issues that i've heard about that I feel need to be thrown out into other's hands and brought to their attention.

That being said, my lesson for today consists of (as many of you know) this past week's election.

Many of you know that the Democrats won. (I speak of NO negative terms to the seperate parties). One thing to realize is the issue of taxation on large companies. In times of change, certain companies will benefit and others will fail. In this case, the issue brought to point is that the profits of large companies could possibly be in jeopardy. In other terms, the more a company profits, the more it may be taxed. This is a large issue when it comes to deciding what and what not to invest in.

A lot of people speak of large oil companies just flowing in money. Don't get me wrong, alot of the time that's true. BUT, with a change in our country, taxes and profits at hand, some feel American Oil companies and large Pharmaceutical companies are in danger.

The Daily Wealth newsletter author, Steve Sjuggerud spoke of this issue the other day. I felt it was very important and must be brought to people's attention.

To keep it brief, he speaks of (what he thinks) will be a winner in the market, and who will be a loser of the market.

Steve believes Biotechs, Alternate Energy and Canadian Oil will be the winners of the market.

As for losers go, Steve thinks of large pharmaceuticals, defense, and big oil companies.

(For more information, please see

I think that the next few years will be an interesting time for the market. All of the changes soon to come only hold a question mark higher and higher above my head.

For the newcomers to the market, this just puts to perspective how changes, big and small, can relate and manipulate the market and its patterns.

Happy Investing Everyone!