Market Discipline
Research for Online Investors

by John Dalt

3/31/11

Today is the last day of the month and quarter.  The market has been on a heck a run, with what looks like the largest first quarter gain in 23 years.  I was reading some lists of investment advice.  It never hurts to go over some of the basics.  We offer premium services for online investors, to help you make money.  Many times what we offer is discipline.

Many online investors do not understand the importance of discipline in managing their investments.  I visited with one of our new gulch subscribers about asset allocation and discipline in our trades.  We can make bad trades, and still make money if we are cold hearted when it is time to sell.

We also have to be steely when sitting on winners.  It is hard to let them run because our “rat brain” wants to take our nuts and go home! In all of our services we employ trailing stops.  To an investor, a trailing stop is never entered in the trading platform.  It is a hard number, which requires action.  I like to trigger trailing stops on long term positions based on closing prices. If it closes below our trailing stop, we sell the next day.  We track trailing stops on our holdings for our customers and alert them if action is required.

When we trade, trailing stops are tight and entered in the computer.  We don’t love anything.  We are just renting it for a few days or weeks.  We want to protect even the smallest profit.

One of the other ‘investment secrets’ on the list reviewed this morning had to do with not chasing stocks.  My wife is always late to the car when we have somewhere to go.  It is a source of friction with us.

As an investor, are you ready early…or are you always looking at the stock that ‘got away?’  We don’t want to chase stocks any more than we would chase an airplane because it left the terminal.  It is gone, forget it.  Look for the next one that will arrive.  Even better, look where the next flight is going…decide if that is a good destination…decide how much you would pay for a ticket…stand at the counter with cash in hand…and buy a cheap standby ticket.  You will arrive at the same time as first class!

These are a couple of disciplines to help every trader of investor.  We invite you to read our articles under Investor Resources.  One of particular interest to investors is the Four Legs of Wealth.

Many of the personality traits you have developed during your career in business may hurt you in the stock market.  Raw determination, the kind you need to make a small business successful can cause you to take undue risk.  Believe me, you cannot ‘will’ a stock to go higher.  And ‘luck’ is not a strategy.

To the mailbag:
A simple solution to the high cost of gasoline is for the government to restrict the purchase of crude oil to users. ---subscriber J.R.

John’s reply: This comes up every time the price goes up (but never when down). The same people suggest all stock purchases should be held for at least a year. That would certainly grind the market to a halt, and increase volatility.  Who would you sell to? Those who believe one trader can manipulate a market should read about the SimGroup bankruptcy (short oil) or Hunt Brothers (long silver). You can also experience the fallacy personally; try eating gold or drinking oil, they are best sold not consumed.

I am discontinuing my subscription, you have too much information.-former subscriber L.B.

John’s reply:  Or, information you disagree with?…and there aren’t any boots on the ground in Libya…just the CIA.  I guess they wear slippers!

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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