The Power of Waiting

The Power of Waiting. When it comes to making money in the stock market, a lot of emphasis seems to be on speed. But Being right is more profitable than being first. And so I've learned that it's best to wait. After all, if the stock will rise or dip, it will rise or dip; whether or not I trade. So it's much better for me to confirm what I think will happen.
When it comes to making money in the stock market, a lot of emphasis seems to be on speed.

When the stock market is depicted in the movies, the setting is usually a hectic room filled with brokers standing up or yelling or both.

And during the flash crash in the U.S. stock market, a lot of hoopla was made about supercomputers able to make a gazillion trades in a micro-second (ok, maybe that's a slight exaggeration).

And then there's insider information. Apparently, being the first to hear the news can make or break fortunes.

And the apparent lesson here is the same thing Ricky Bobby believed - "If you ain't first, you're last!"

But is it true?

Lets consider for a moment that those things might be true. But confidential information that can turn fortunes don't occur everyday. I'm not even sure it happens every month. And it's not like I'll hear all the secret news first all the time, right? So what do I do in the mean time?

And sure, those super computers and super fast network connections are fantastic to have. But can it make me money if I buy the wrong stock?

(And the trading floor of the stock market is actually pretty calm, based from what I hear.)
The Power of Waiting. When it comes to making money in the stock market, a lot of emphasis seems to be on speed. But Being right is more profitable than being first. And so I've learned that it's best to wait. After all, if the stock will rise or dip, it will rise or dip; whether or not I trade. So it's much better for me to confirm what I think will happen.

All those things give an edge, but people have made money in the stock market before without them. And the thing is, being fast helps. But being right matters more. In this case patience isn't just a virtue, it's a money-making asset.

And I've personally experienced this myself. Last year, I sold AC at the first sign of a rise. Only to see it rise much more in the next few weeks. I'd buy - and use up all or most of my cash reserve - at the first sign of a dip. And then it would dip further and I wasn't able to buy more.

But lately I've had more luck. In late 2012, I bought CHIPS for it's dividends. But the price suddenly started rising. Instead of cashing in, I waited. And when I confirmed it was at it's peak, I sold. The result was a 74% return. My best trade so far :)

And instead of buying CMT shares because of what seemed like a good dividend, I waited as long as possible. I saved myself a big headache because the trading of CMT shares were suspended due to not meeting the minimum public float (something that I had not initially considered).

And so I've learned that it's best to wait. After all, if the stock will rise or dip, it will rise or dip; whether or not I trade. So it's much better for me to confirm what I think will happen.

Being right is more profitable than being first.


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photo credit: Lummmy via photopin cc
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4 comments:

  1. What u said about the trading floor is true. I was able to go on a tour last october and it was quiet. The brokers look bored. Hehehehe

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    1. Wow! I've actually never been inside mylsef... Not really excited to go now, after you said that:D

      But how'd you get on the tour?

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  2. how would you know if a stock reach its peak?I'm a newbie and still learning.tnx

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    1. Actually that's tough even for veteran stock brokers (i.e. pros).

      In my case, I got lucky. CHIPS just stalled and started trading sideways. So I knew it was pretty much the top. It could go down or up after the consolidation, but I didn't need to stick around since I was in it for the dividends anyway.

      There are some basic stuff to guide us though. We could do fundamental analysis and determine what the fair value would be. It wouldn't trade much higher than that unless we were in the midst of a big bull run (like the early part of this year). [the easy way for that one is to get a broker that give you the fundamental analysis]

      Another way is through technical analysis. I favor Elliot waves, but any other method or set of indicators would do. Basically you gauge the market sentiment (i.e. bullish, bearish) and see if the price still has room to grow. I'd favor looking at long-term trends though, as stocks always pull back but that may just be a short-term thing, and it could still be headed for bigger gains in the long-term.

      But a more direct answer to your question is that you can't really know for sure. In my case with CHIPS, it could have gone down instead of going sideways, and only then would I have known the peak was already reached. I probably would still have ended up with better gains as long as I did not wait too long, instead of selling prematurely.

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