You'll Never Sell the Top, Don't Go Broke Trying
You'll Never Sell the Top, Don't Go Broke Trying
You’ll never sell the top.
To succeed in the markets, you must accept the fact that you will never sell the top or buy the low.
Investing is an imperfect game. You have incomplete information in an uncertain world to make the best decision you can. You then see an outcome which is partly up to chance.
It’s easy to fool yourself.
With the benefit of hindsight, trading looks easy - almost too easy.
If you missed an opportunity to buy or held too long and sold lower, you might find yourself regretting the choice. But it’s only with the benefit of looking back that those decisions appear to be obvious. In the moment, with the information available and the future uncertain, it was impossible to know.
You’ll hear less sophisticated investors and weekend speculators say things like ‘I almost doubled my money, I just needed to hold it another week.’ Or ‘Ugh, I knew I should’ve bought more.’
No, you didn’t know that with enough conviction to act on it, that’s why you didn’t do it.
Don’t let one mistake lead to ruin.
The problem is when you convince yourself it will be easier next time or your judgment becomes clouded with regret. If you think it’s easier than it is, you’ll become overconfident and take too much risk. If your judgment is filled with regret, you might take a position you shouldn’t.
This is how one mistake leads two and eventually to ruin if you let it snowball away like that.
The best market participants embrace and accept the uncertainty.
Sure they may regret decisions but they don’t delude themselves into thinking they could have or should have done things differently. That’s wasted energy.
The people who make money in the markets:
Learn what they can from past decisions
Evaluate the quality of their decision rather than the outcome
Do not let hindsight bias cloud their view
Look, it’s easy to see a price chart, and convince yourself you could have seen buying lower there made sense and that holding up to here to sell higher would have been easy to identify.
But you’re suffering from hindsight bias.
Don’t fool yourself.