One of the most prominent developments of the GME craze was the notion of “diamond hands” being a show a strength. Retail convinced itself that in order to be strong you had to hold. If you sold, you were weak. Anyone who took profit was shunned by the trading community at large and the movement likely was even responsible for “DFV” himself publicly showing how he was “not selling” to appease the masses.
The irony here is that in reality, it’s the exact opposite. When we trade stocks, we’re watching money be created before our eyes. It’s really incredible when you think about how when you click a button, you immediately have acquired whatever amount of money is shown. Such a simple process to obtain one of the most important resources in existence. It’s exhilarating when the numbers start running up and depending on the play it can almost feel like you are the master of your own destiny, like you can have whatever amount of money you’d like, you just have to say “when”.
It takes no effort to “hold on” and live in that moment of euphoria. It takes incredible effort to say “when” and accept what “is” over what “could be”. Strong hands are evidence of a weak mind.
One of the most common things I see traders struggle with is selling. There’s two stages to it:
- “I don’t want to miss out on potential gains, so I’m holding.”
- “I just want to get back to what it was worth at “this point”, so I’m holding.”
As a stock is running, we’re continually settings value points in our heads. “Alright, I’m up 5K… 5.5K….”, etc. Our sell point is “moon”, the unknown. We get attached to those numbers and when we’ve missed a peak, we set those numbers as our “sell point” and hold hoping to now “just get back to that”… and we’ll lose more doing so. Before every “squeeze”, I say the same thing:
It’s going to start running and you’ll get to a point where you’ll think to yourself, “There is no way this can go any higher” and 99% of the time you’re right and should sell.
The reason I say this is because in every large gain play I’ve ever had, if I had sold the moment I got “the thought”, I would’ve made damn near the most money I could’ve made in the play. Any time I’ve ignored that thought, I’ve ended up selling for far less.
One of those most important things to learn in trading is that accepting victory is a show of strength. Our community cheers profit taking because it’s the only thing that truly matters. It’s why we’re here. If you’re not taking profit, you’re accepting loss… and I don’t know about you guys, but that sounds awfully weak to me.
Homework:
In order to help “respect the thought”, research “compounding gains” to see what focusing on smaller percentage gains can do for you even in a small amount of time with a small amount of capital. The lower “average” percentage gain on plays in this server is 10% per play with multiple plays per day. Learning to cut at even modest percentages daily compounds into substantial gains in the short term:
Calculator #1 (More configurable): HERE
- Put the amount you use per trade in principal amount.
- Interest is the % gains you’re targeting
- Don’t include weekends (obviously)
- Timeframe is self explanatory
- 100% reinvestment
- I would suggest not “adding” additional money just to see what you can do on gains alone.
Calculator #2 (Simpler): HERE
- Starting balance is amount you use per trade
- Set monthly contribution to 0
- Rate of return is amount of gains you’re targeting per month.
Next up: “The Unicorn fear”
correct. I believe that there are some things you learn in life the hard way. Like a Stubborn teenager.