Sticking to the Investment Process

When I established my Investment Process back in May 2012 I decided to trade around my core positions.  I recently added to my Canadian Oil Sands position but when it quickly rose over 12% I failed to sell some of my position.  The stock has since fallen.

Why did I not sell?  Well, because the 12% rise was so fast that it seemed silly to sell so quickly.  Let me rephrase that: I made a profit so quickly that I failed to lock it in.  This is foolish and is an example of letting my emotions get in the way of my strategy.  This is a mistake that I shall not repeat.

I am recording this as a bad call even though it was not a trade.  Sometimes failure to trade can be just as bad as a bad trade.

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2 thoughts on “Sticking to the Investment Process

  1. canadianmdinvestor says:

    If you are worried about discipline, why not enter an automatic sell, when you buy. Say 20% profit & sell. Or 10% or whatever. This takes it out of your hands. Just like when you put in the limit order to buy.

    Problem is the depending on how much you are buying, your profit may be eroded by the transaction fees, especially if the profit bar is low.

    Enjoying your blog….

  2. Good point. I don’t normally expect to see such a significant gain so quickly so I think it caught me by surprise.

    Setting a limit order in advance would cure this. But here’s the issue. I normally carry around ten stocks. I would need to have one buy and one sell limit order for each, and I would need to create these orders every month (TD Waterhouse orders expire after 30 days). That’s 20 orders a month which is a lot of work and introduces the risk of error (if I’m creating 20 orders every month I will make a mistake sooner or later).

    I use a spreadsheet in Google docs to give me buy and sell signals. Google docs spreadsheets can look up live price info from Google finance. Also, using a spreadsheet allows me to add a factor for expected growth: if a stock goes up 10% in a week then I’ll sell some, if it goes up 10% in year then I will not (I expect my stocks to grow in the long term). All I have to do is click on a link to get an instant report.

    I think the solution for me here is to learn from this error and act decisively. That’s why I maintain Dataclutter: to record my good and bad calls, and learn from them.

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