Shrink Rap: Better to Miss a Chance Than Lose Money

Refusal to Chase Performance: Discipline or Obstinacy?

Dr. Hendlin, I was hoping you could help me with a problem I have. First off, let me inform you that [I] am more of a position trader. I like to hold stocks for intermediate-term moves, i.e., one to 12 months. Many times when I have a strong conviction about the direction of a stock, I fail to execute because I wait for the perfect entry point. Then if it starts moving in the direction I predicted, I refuse to chase it, even though I know it will probably move much more in that direction. This causes me to get really frustrated with myself as the stock takes off without me. What can I do to overcome this? It has cost me thousands of dollars in missed opportunities.

-- G.L.

Shrink Rap: Trader Todd Harrison is fond of saying, "Missed opportunities are made up more easily than losses." I agree, and have remembered this when watching a stock that took off without me. Sometimes there is a fine line between showing the discipline to hold off for a better price vs. being stubborn and unwilling to commit to enter a position. Given the current environment, my own preference is to hold off until I am convinced that I have a good entry point, and to be very cautious when taking intermediate-term positions.

Severe bear markets tend to go lower than we ever thought possible. I suggest investors caught in the dilemma outlined above continue to err on the side of missing an opportunity. Don't get trapped into believing there is just one perfect price moment for a good entry, or that missing a short rally is the end of the world. ...