Investing Mistakes: Stop Shooting Yourself In The Foot

| November 10, 2010 | 0 Comments

I was flipping through my charts the other day when I came across a chart of Baker Hughes (BHI).  When I first saw the chart, I shook my head in disgust.  Then I let out a big sigh of discontent.


Take a look…

Baker Hughes Chart

As you can see, the oil service company’s stock is having a great bull run.  The stock is up over 30% since the end of August.  It’s a nice move and many investors are making a sweet return.

But I’m not one of them…

Nope, I missed it.  And I’m a little disappointed in myself.

You see, one of my strategies is to buy support zones in a basket of stocks I watch.  Whenever a stock in my basket hits an important technical level, I position myself to profit.

It’s a simple system that works very well as long as I control my downside risk.

BHI is in my basket of stocks and it showed a perfect entry at the $38.00 support zone (green circle).  I was watching BHI as it traded this level in late August.  I’ve even bought this support zone before with great success.

All I had to do is buy the support zone with a stop-loss just under $36.00.

But I missed the boat this time…

Why didn’t I take the trade in BHI?

BHI had reported earnings a few weeks earlier and their results were disappointing.  The stock had fallen precipitously with heavy volume on the news.  Sellers were all over the stock for weeks.  And there was a lot of negative press at the time.  I didn’t “feel” there was much upside in the stock due to the recent news.

And that’s where I made my mistake…

I let my feelings and a number of outside variables influence my decision.  My simple yet profitable strategy was flashing a buy signal.  But I didn’t take the trade.

You can see BHI’s been screaming higher…

Like everybody, I make mistakes once in a while.

But I really work at learning from my mistakes when I make them.  I have a process I go through which helps me become a better investor.

If you make an investing mistake, here’s how you correct it…

First of all, be accountable and take full responsibility for your actions.  It’s the only way to become a better investor.  If you can’t take responsibility for your actions, you’ll have a very tough time being a successful investor.

In other words, it doesn’t work to blame your mistakes on the market.  For example, you could say, “The market tricked me.  It should have given me a clearer signal to buy.”

Or maybe you use an excuse like this, “I wasn’t too sure about getting into that trade.  The market just didn’t feel right.”

Both of these excuses do nothing to make you a better investor.  They only cause you to miss more profit opportunities in the future.

By putting the blame elsewhere, you’ll never learn from your mistakes.

This is one of the cardinal rules of investing (and life for that matter)…

Be accountable for all of your decisions.

Second of all, be committed not to make the same mistake again. Recognize the thought process that led you into making the mistake.

In my case, I’ll make sure I take every trade that fits my strategy… no matter what my gut says.

Picking and choosing investments based on how you “feel” at the time is a surefire way to fail.

Listen, everybody makes investing mistakes…

But there’s a big difference between making a mistake and making the same mistake over and over again.  In the long run, it’s going to cost you a lot of money.

If you make a mistake, do what I’m doing right now… be accountable and move forward.

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Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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