Sunday, September 16, 2018: The Use of Logic and Gut Instincts When Trading Stocks




Basics and Fundamentals

Hmm, where to begin?

I’ve been a stock trader and portfolio manager for more than 10 years now.

I’ll be honest. The ride has been of trial and error, but for the most part I’ve been quite conservative in my trading and investing strategies.

Of course, the basics would be to invest in a good company with solid fundamentals and financial performance.

How do we know this?

By studying the financials and fundamentals of the company. And, also determining whether a company has a great business model, has excellent products and/or services to sell, and by studying annual reports that indicate that the company is profitable and successful.

Many people think that they should leave it up to the professionals to make money for them, but with the Internet and the ease of online trading of stocks and bonds, it is so much easier than ever before to become a stock trader, and it’s so much easier to lose money as well.




But, to be a successful stock trader, one has to simply become aware of the products and services people use in their everyday life and watch those companies that are the most successful in delivering to the customer.

Case in point. Apple, Inc. Now a $1 trillion dollar market cap corporation. You see everywhere that people are using Apple products like iPad, Macbook Air, iPhones, iCloud, iTunes and so on and so forth. And people are willing to spend their hard-earned dollars on pricey iPhones and iWatches! But, they create a product that people have to have, that looks sleek and has an intuitive interface, and is super easy to use.




Logic versus Gut Instincts

I believe that some people might have the knack for picking winning stocks. They have this gut instinct that has proven to be successful.

But it’s important and essential to have some logical skills as well.

And logic can be applied to the study of technical stock charts. Studying patterns of a particular stock, and humans find it easier when things can be broken down into visual patterns of a stocks performance, compared to just looking at numbers all day.

The thing is, when you buy a stock, you are giving them your money, and they are going to take that money and try to make more money. And many times a stock has a dividend which the shareholder gets every quarter (depending on the stock).

You put your faith in the concept of a company taking your money and making more money, and thus you sell the stock sometime down the line when you’ve gained a substantial profit and/or you receive dividends for investing in the company.

Now some say that you learn a lot from a losing stock. And I would tend to agree with that statement. It’s true that you can learn a lot from the mistakes you’ve made. For one, you are inclined to not make the same mistake twice, and you’d be much more careful to not lose money again.

After all, there is a trial-and-error process that also goes along with trading stocks, no matter who schooled you are in the stock market.

I like the Teddy Roosevelt quote that illustrates this thought:

“Do what you can, with what you have, where you are.”Theodore Roosevelt

If you have X amount of dollars to invest in the stock market, you are using what you have in an attempt to earn money.

You do what you can with the knowledge and skills you have acquired, so it’s important to read a LOT and gaining more knowledge in how the stock market works is always good.

Where you are? Well, consider this… when my wife and I were in China and Tibet, I was trading stocks along the travels… in today’s world of internet access and the world wide web, you can be physically anywhere in this world and still be able to trade stocks!

You have the ability to monitor your stocks, anytime, anywhere.

In the end however, your gut instinct will depend on what you’ve learned from the past (trial and error) and how you can apply your experiences to future trades.

Also, when trading stocks, you are making decisions. Important decisions.

Investment decisions to make money, most of which would be passive income.

So, it’s important to be focused on how you came about to a given decision.

Why is this a good decision?

And how will it affect your life in the future?

Disclaimer: The content provided here is for information and entertainment purposes only. It is not intended as an offer or solicitation to purchase any investment. And this material should not be taken as investment advice, since investors’ needs and strategies may vary. Investing in equities is subject to extreme volatility.
Trade at your own risk.

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Carlos Rull

Carlos Rull is a musician living in the San Diego area. His interests include Yoga, Eastern Philosophy, Zen Buddhism, and Gardening. He plays drums, piano, and composes New Age & Ambient music, and his albums are available on iTunes and Amazon.com.

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