This report is not a personal recommendation and does not take into account your personal circumstances or appetite for risk.
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when prices drop sharply people often get Interested in recovery potential and hopes of a rebound. ‘Doubling down’ or ‘averaging in’ is a valid strategy, widely used and in many cases highly profitable, however, don’t forget that a 10/20/30% fall in share price requires a bigger percentage recovery to achieve breakeven. While the absolute change in price will be the same, the lower starting point means that the percentage recovery required is always greater.
Don’t let pride and ego get in the way of your investment goals. If you’re wrong you’re wrong. Closing a bad position may deliver an acute sting but staying in one can result in chronic pain. A trade may be right today but easily wrong tomorrow. Be honest and move on. As in life, learn from the experience. If big news changes your view on an investment, it may be time to re-evaluate the position.
“Trade what you see, not what you want to see”
Because shares are paid for in full, with no further demands of the investor even if they fell to be almost worthless, many are guilty of ignoring losing positions, hoping they will come back. While ignorance may be bliss, forgetting about them will never erase the loss. There is a lot of truth in the old adage that “a long term position is often simply a short term trade gone wrong”.
“Move on from your losing positions. Don’t forget them, just forget how you felt”
While keeping records of past investments is a helpful exercise allowing appraisal of what went both right and wrong, so too is reviewing your portfolio of open positions regularly. Some even say that if you can’t see a valid reason today for replicating an existing investment then why keep it open? While reviewing your positions is key, so too is knowing you are using the right product for your strategy.
Don’t get sucked in by get-rich-quick schemes promising strategies that will double your money in a short time period. While theoretically possible, the majority unfortunately tend to involve seminar (for a fee) designed to sell you a book (for a fee) which will focus on you trading big and often (with a preferred provider). This is fine so long as you appreciate the risk involved.
Furthermore, if these strategies were so good/successful, why is someone needing to supplement their income by offering fee-paying seminars? Why aren’t they trading from a deckchair on some island paradise? Be realistic. There’s no such thing as a free lunch. There is no magic formula. What there is though, is a world of investment opportunities. Furthermore, starting off with £10,000 and expecting to generate a secondary income of £100,000 per annum is unlikely to happen. While objectives and goals are important, they also need to be realistic.
Technological advances have in many cases put retail investors on an even keel with the professionals in the Square Mile. However, not all share investors are aware of the helpful tools at their disposal, still relying on telephone dealing, delayed pricing and aggregate orders rather than benefiting from modern platforms which offer DMA (direct market access, live prices), better pricing and in many cases lower dealing costs as well as the option to place future time and price dependent orders.
Furthermore, news feeds and charting packages have come a long in terms of their flexibility, information quality and technical indicators now allowing you to stay right up to date with the financial markets, abreast of what news is moving which shares, why and by how much.
As an investor you should expect a lot from your account provider. However, in many cases you get far from what you deserve. Most brokers rely on leaving huge numbers of customers to invest/trade off their own back, offering little or no support. If they do offer advice, it is often poor quality and bad timing. At Accendo we don’t tell you what to do, as everyone has different investment/trading requirements. However, we are always here to help in terms of education, information and assistance.
Our unique and award-winning service provides you with the help and tools you need to make appropriate trading decisions in the financial markets, both to grow and protect your capital.
Before taking a position in the markets, be sure to contact Accendo for…Updates – How do things look in terms of investor sentiment? What’s going on in the markets and round the world? What are the brokers saying about your favourite stocks?How to use CFDs and Spread Bets to maximise your profit potential.
How to use the tools available to minimise the risk involved.
This research is produced by Accendo Markets Limited. Research produced and disseminated by Accendo Markets is classified as non-independent research, and is therefore a marketing communication. This investment research has not been prepared in accordance with legal requirements designed to promote its independence and it is not subject to the prohibition on dealing ahead of the dissemination of investment research. This research does not constitute a personal recommendation or offer to enter into a transaction or an investment, and is produced and distributed for information purposes only.
Accendo Markets considers opinions and information contained within the research to be valid when published, and gives no warranty as to the investments referred to in this material. The income from the investments referred to may go down as well as up, and investors may realise losses on investments. The past performance of a particular investment is not necessarily a guide to its future performance. Prepared by Michael van Dulken, Head of Research
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