Long Term Hold for a week
The most infamous term that new traders throw around is “it's a long term hold”, which is the farthest from the truth, trust me I know as I was that same rookie who would boast that every idea I had was a long term hold. However here’s a peak behind the curtain, every one of my long term holds were all names that I bought that fell in price, and continued to fall in price and yes they would fall from my price for more than a year and then guess what? As soon as a stock got back to my price, I would sell it for breakeven or a small 1% gain even though I sat through a 50% loss to find the next long term idea and sell my stock to a professional as it would soon breakout (now I am on the other side of that transaction more times than not).
Now you might be thinking, how can I can compare the logic of a new trader’s idiotic “long term holds” to my own stupid trades? Very simple, We talk to thousands of new traders every single day. Their story is word for word the same as what mine was. If they buy the stock and they are right, out of 100 new traders only around 1-2% actually stay in for a year plus while the other 98% turn this long term idea into a quick trade.
This same group of new traders will hold losers with pride and boast of all the fundamental reasons why the stock should go higher, yet once it finally turns around they end up giving their stock to professionals like us. We call this trade The Round Trip. However enough talk from me, let's take a walk in the shoes of a recent Long Term Investor that could not make it a mere 24 fucking hours after explaining his Long Term Hold. Get your popcorn ready.
This was on March 11th, let's take a look at this long term hold in the chart below.
(Click on the chart for a bigger version)
He has survived for 8 days so far, just 340+ more days to go, he's got this!
Now on the way up most traders are as confident as one could be, as he claimed “I’d be buying calls”. Unfortunately options are not available for happy meal stocks. It's now day 9 guys, with less than 340(ish) days to go, let's see what his plan is now a mere day later in this long term hold.
Hmm, a day ago he was telling us we should buy, now that the stock is tanking he’s already looking for the exit, he doesn't sound as confident as he was yesterday.
That same day he puked the position for breakeven and the weed company that was going to change the world was now just another stock. In general holding your winners for as long as possible and cutting your losers quickly is a very profitable strategy. All of our major winners, KITE 140%, ANAB 70%, NKTR 65%, CAT 60%, SQ 60%, MU 45%, etc all took time. They did not happen overnight however none of them took even a year. All of them happened within a year’s time. Most of those big winners were all in retirement accounts where Uncle Sam is not getting a penny of my profits.
Holding long term on paper makes sense however when you’re new you tend to lack the patience that is required to actually hold a WINNER for a year. Holding a loser for a year is cake walk as 95% of investors have done it their entire investing careers. There is a taxable benefit to holding a stock longer term however for most starting out, tax strategy is not something that is really an issue yet as you can see below.
Your first $9,000 in profits short term is only a 10% hair cut, if you’re making less than that, long term holding for tax benefits is probably not much of a concern just yet.
Just like trading, patience comes with time. Aim first to hold a profitable trade for a week, then two, then a month, then two months, then a quarter, then 6 months, then for up to a year. Key words here are profitable trades.
PROFITABLE and TRADE.
Every trade starts out as a day trade that become a swing trade that becomes a longer term hold. Not the other way around. Hold your winners and cut your losers quick! Rinse and repeat.
Do you have balls?
In the Group Chat share your experiences with “long term holds”, such as, were you able to hold a profitable position for a year plus, were there times where you held a position that was going against you only to sell it for breakeven or a small profit? If you did would it have just been easier to read the chart and buy on the way up instead of on the way down?