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Trader Psychology (on my way to 2000%+)

9/11/2017

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By: ShortMeTina
​
​I guess you can add this blog, along with the others I have written, under the category “trader psychology”. 
 
I think a lot, I am a thinker!   And this thought came during one of my forever happening thinking sessions. 

I am not sure if you’re aware but Electric Car Maker, Tesla (TSLA) is up over 2000%.... YES 2000% since IPO-ing at $17 in 2010.  To put that into perspective; if you invested $10,000 in this company when it IPO-ed and left your money in Tesla; that 10k is now north of a quarter of a million dollars ($250,000). 
​If you had 50k laying around and invested in Tesla’s IPO, you’d be a millionaire right now! 
 
The point of the blog isn’t to make you feel bad about missing this gravy train but it’s to ask you; would you have had the discipline to remain in this trade through all the ups and downs? 
 
Hindsight can be a sick and twisted game to traders/investors like myself.  I mean; why wasn’t I in this trade from the beginning! 
 
I know I am not the only one that think like this; finance twitter is filled with a bunch of; “why didn’t I’s”. 
 
So; like I asked traders last week, “would you take trade #17 without hesitation”; I am asking folks now, “would you have been able to withstand the ups and downs on your way to riches?” 
 
Let’s pull out some examples to further illustrate what I am talking about. 
 
Let’s say you got into Tesla during its early days and in October/2013, while Tesla's stock was trading at $194.23; you had $10,000 worth of stock. 
 
You left your account alone for 30 days; come back and the stock is now trading at $116.10. Your account is no longer $10,000 but it is now $6,000.  You’ve lost $4k. 
 
At 6K, do you preserve what you have left or do you continue to ride it out? 
 
Let’s say you’re a ride or die and you stick it out.
 
It would take you well over a year (365 days) to get your account back up to 10K, before going on to hit $15,000 in September of 2014.
 
However; a few months later…
 
March of 2015 your account is back under… …you’re at $9,750. 
 
What would you do then?  Would you remain in the trade? 
 
Let’s recap:
 
You started with 10k, dropped to 6k, back up to 15k, now you’re under 10k.  Are you still in the trade? 
 
Good!  You’re a trooper; let’s see what your account would have done throughout Tesla’s ride to 2000+%. 

Month/Year
Account Value
October/2013
$10,000
November/2013
$6,000
September/2014
$15,000
March/2015
$9,750
July/2015
$15,600
February/2016
$7,800
April/2016
$14,820
December/2016
$9,633
June/2017
$20,710
July/2107
$16,568
September/2017
$19,881

​ 
As you can see; stocks do not go up in a straight line.  The drawdowns are fierce!!!  From Sept/14-Feb/16; you went from 15k to 7k. 
 
April/16-Dec/16 your account went from 14k to 9k.  These are sizeable drawdowns but par for the course. 
 
It’s a necessary ‘evil’. 
 
I won’t ask you any closing questions but I will leave you with my last two statements:
 
You want that 2000% return?  You will experience, “sizeable drawdowns…it’s a necessary evil”. 

Good, Bad or Ugly, comment below.  

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    Tina "ShortMeTina" Ley (pronounced Lee) holds a Bachelor of Arts in Forensic Psychology and a Master's of Science in Mental Health Counseling and has been a stock market participant for over a decade.  Currently a Full-Time Trader and Blogger of all things financial.  ​


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