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Thread: Investment psychology

  1. #1
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    Default Investment psychology

    You will find that you are either a natural born Bull
    or a natural born Bear. A lot of your judgement is
    no judgement at all but the result of your natural
    inclination for one side or the other.

    W. D. Gann

  2. #2

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    Quote Originally Posted by oak333 View Post
    You will find that you are either a natural born Bull
    or a natural born Bear. A lot of your judgement is
    no judgement at all but the result of your natural
    inclination for one side or the other.

    W. D. Gann
    Since I only buy and hold for long and can't stomach the idea of shorting a stock, I suppose I'm a Bull. . .but is there a test or other measure to determine if one is a 'natural born" Bull or Bear ?

  3. #3

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    Quote Originally Posted by The Sage View Post
    Since I only buy and hold for long and can't stomach the idea of shorting a stock, I suppose I'm a Bull. . .but is there a test or other measure to determine if one is a 'natural born" Bull or Bear ?
    There is no test BUT basic human instincts are for survival and that is combined with the fight or flight individual inclinations. So, I do not totally agree with the quote as we also have logic and common sense to consider at the individual level. Thus I see a third group that is neither Bull or Bear by nature which I would call the "self aware" group. This group tends to also be Libertarian.... :-)

  4. #4

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    Or you can learn about your own behavioral biases so you become more of a rational investor.

  5. #5
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    I am thinking of a simple test: how much money
    somebody makes in a bear market. LOL.

  6. #6

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    Quote Originally Posted by oak333 View Post
    I am thinking of a simple test: how much money
    somebody makes in a bear market. LOL.
    although not a business man, by any stretch of the imagination, I've garnered about 8% clear across the last 10 years
    not much but I don't sell much, just cleaning out my house and the rest has been lost in a boat somewhere

    so, there's no such thing better than watching a cohort of mine, he'd love me for saying that, is traveling the country, searching for straps of FRN'S, making a fortune from the notes he's finding, having the time of his life while suffering from VA coverage, etc, but the point is...



    You Invest In That Which You Know Of

    you don't, you're foolish
    you do, well, it's the markets, so, GL, as always


    DYODD of course
    LOL

    Honor for US, Justice for Our Children! Now!

  7. #7

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    Quote Originally Posted by oak333 View Post
    I am thinking of a simple test: how much money
    somebody makes in a bear market. LOL.
    oh



    don't follow my advice

    LOL

    just don't
    LOL

    Honor for US, Justice for Our Children! Now!

  8. #8
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    Let us say that a stock went up from 20 $ to 50 $ and then reacts
    to 40 $. How will different people see it:

    A bull: now that it is cheaper, it might be a buy.
    A bear:if it went down so much, may be it will continue
    to go down so it might be a sell

    There are these possibilities:
    ----the stock will go back and even exceed the old peak of 50
    It looks like a real buy.
    ----the stock will go under 40, but not under the old low of 20.
    It might be a sell.
    ----the stock will go under the old low of 20. It is definitely a
    sell. It means that the insiders withdrew any support. It is
    well known that it is safer to short at lower prices, when the
    picture became clear.
    ----the stock will fluctuate between 40 and 50. The thing to do
    is to wait until the stock penetrate the support or resistance
    and follow the trend.

  9. #9

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    There are so many other things to be considered. Each equity in that situation must be assessed to make a determination of the probabilities of each factor you note. I personally look at probabilities and then make a decision.

  10. #10

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    Quote Originally Posted by oak333 View Post
    Let us say that a stock went up from 20 $ to 50 $ and then reacts
    to 40 $. How will different people see it:

    A bull: now that it is cheaper, it might be a buy.
    A bear:if it went down so much, may be it will continue
    to go down so it might be a sell

    There are these possibilities:
    ----the stock will go back and even exceed the old peak of 50
    It looks like a real buy.
    ----the stock will go under 40, but not under the old low of 20.
    It might be a sell.
    ----the stock will go under the old low of 20. It is definitely a
    sell. It means that the insiders withdrew any support. It is
    well known that it is safer to short at lower prices, when the
    picture became clear.
    ----the stock will fluctuate between 40 and 50. The thing to do
    is to wait until the stock penetrate the support or resistance
    and follow the trend.
    One of the stocks I cover went down to $51 from ~$55. The company has strong financials, management is doing great, economic conditions are right for the company, they performed better than expected with the recent weather experienced over the past 2 months (rain & snow, and are on track to meet their goals for by YE. Right now the price is moving in opposite of what I have forecasted; however, I see it as a buying opportunity because there is nothing going wrong for the company at the moment. My model shows that the upside potential is 38% price appreciation, and the downside is 5% price depreciation.

    Another one I cover went from ~$70 last year to $16 as of last week. The company sold off their unprofitable division, their acquisitions are going better than expected, they are realizing more syngeries than expected from one of the acquisitions, they are focusing more on their money maker, and putting increased focus on e-commerce. A year ago, I would have said they would eventually go to $0 if they didn't change their strategy. Now, I'm looking at a price target of $25.87 by YE.

    The way you should see it is: if you understand the drivers, the risks, and where the value of the company comes from then you should know if it's going to go up or not. Sometimes the market has things priced wrong and it could take months/years for the market to realize that something is priced wrong.

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