Start Each Sail With The Return To The Dock In Mind
There are five (5) main considerations to sail a boat:
- The boat you choose to set sail with.
- The price you pay for the boat.
- The date you set sail/depart (buy).
- The date you return (sell) the boat.
- The price you sell the boat for.
There have been many times I have left the dock and then, while sailing, I'll do math to determine when to return to the dock only to realize I wish I would have stayed at the dock!
When you buy a boat, buy it with the end in mind.
Take a look at this example:
- Let's say a boat is selling for $40 per share and your research shows it might be a good time to buy.
- Let's say you want to make 10% so you would like to return that boat to the dock at $44.
- Let's say you don't want to lose more than 10% so you will need to return that boat to the dock if it hits $36.
- You were hoping to sail less than a month, but, after you set sail, you start looking at your charts and you see it's been a while since this boat sold for $44. Furthermore, based on the sea conditions, you think it might take a while to get back to $44. Even further research shows the boat has a good chance of hitting $36 before it hits $44! Did you really want to sail it that long? Do the $44 and $36 exit prices now make the $40 purchase price less attractive?
In summary, try to condition your brain to think as if you are buying the boat at the price you want to sell it for. Using the above example, $44 and $36 are the key prices you want to be thinking of (write them down) BEFORE you set sail at $40.
Fair winds and following seas! Black lives significantly matter.
Trading Tide Levels (at the time of the post):
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