Robbie Burns
Robbie Burns's columns :
12/10/2011LESSONS LEARNED OVER FOUR YEARS
12/07/2011SUMMER HOLIDAY BLUES
17/05/2011EXCUSE ME >>
14/02/2011AN AWFUL STORY TO LEARN FROM
26/01/2011STOPS MIGHT HELP YOU WIN

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.


EXCUSE ME

17/05/2011

EXCUSE ME....

 

Lazy old me. I realised I hadn't written anything for a while here.

 

I thought about some excuses. I could have said "I've been too busy with this that or the other".

 

Or countless others. So let me just be honest. I've been lazy. No excuse and will try and write more regularly. I'm a lazy old git, okay?

 

I did start once or twice but there was always something else going on. Like the climax of Deal or No Deal..

 

In fact what I am going to write about is excuses.

 

I've had so many emails recently and talked to a lot of people at seminars. About why they haven't sold their dud stocks.

 

A lot of small cap oil and commodity stocks have tanked recently. Yet holders, well they keep holding despite in many cases massive losses.

 

As I write in my books once you get a 10 or 15% loss it's usually best to take the hit. Something is going wrong and you can always buy it back.

 

One example is Desire Petroleum which kept finding water instead of oil. It went from 150 to 15p.

 

Here's a typical response from a holder who held all the way down: "Desire Petroleum   I bought  at 150p but the news stories were on a knife edge and it could have either soared or tanked - now they are circa 30p - waiting until the next drill...."

 

Or "I kept holding Desire as I really thought it would just come back..."

 

Or "Well it's gone down a lot so I may as well carry on holding it"

 

or "Maybe the next drilling report will be a good one.."

 

Or "There is no point selling it as I lost so much."

 

These are feeble excuses. Losses have to be taken quickly. You can always buy back into a share at another time.

 

If your portfolio becomes full of losers it is very bad psychologically. Waking up every morning to big losses  is bad for a trader. Best to quit and start again.

 

On other shares people start to blame everyone else but not themselves.

 

Fairly typical they blame a share going down on "gangs of shorters". Or else they say "I'm going to call the FSA, it's market abuse." Or it's someone else's fault, maybe a tipster or a bulletin board writer who "got them into it".

 

It is never their fault for buying something that they didn't research properly then never set a stop loss and watched it go down helplessly.

 

One reader sent me a heap of abuse just because he blamed everyone else. I got a whole lot of four letter abuse because I gently pointed out that well, he bought these shares and so he had only himself to blame, not the people on the bulletin boards.

 

What they don't do is go back to the share and try and examine why it's going down.

 

It's usually nothing to do with a price manipulation. It's often because the share in question perhaps got overrated. Usually when a share tanks it's because it was all jam tomorrow.

 

There were no real profits being made.

 

Many hold onto shares even though they issue a profits warning. Or find water. Or the miracle drug never got approval.

 

I guess part of it is ego. Not wanting to be proved wrong. And part of it is simple inability to take a loss when it is smaller.

 

So, ok you made a mistake. Take that mistake and move right along. If you don't you will simply lose your shirt.

 

Sometimes small oil stocks can fall 40% or more overnight on a bad drill. In this case normal stop losses won't help.

 

So I do suggest if you want to punt on small oilers consider using a guaranteed stop loss with a spreadbet firm.

 

Though you have to pay more on the spread when you start the bet at least they will get you out with your balls attached if the share slumps before the market opens.

 

For example if you had bought Desire at 40p hoping for a good drill you could have set a guaranteed stop at 30. Then you would have been out at 30p and not 15p when the price halved overnight.

 

Morals of this write up?

 

Don't blame others. Have a trading plan. Get out fast when things start to unravel.

 

And finally I'd say don't have everything in small oil and commodity punts. I would never have more than 10% of a total portfolio in them. It's just too risky.

 

Right lunch is ready and I want to watch the news. Which is my excuse for ending this article. See you soon. Sooner than last time.

 

Unless I can think of a good excuse...


You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk

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