Hi ,
Norman Hallett here from The Disciplined Trader.
As a trader, there are times to be patient and a time
move quickly.
If you try to hit home runs when you trade (and there's
nothing wrong with that if you have a plan), then you
have to know 3 things:
ONE: As with any home-run-hitter, you're going to
strike out a lot...and I mean you'll lead the league
in strikeouts.
TWO: Your plan has to take into account all those
strikeouts...meaning yo have to make sure that your
homeruns cover all your losses to give a nice net gain.
THREE: You're going to need a lot of patience. It will
take a lot of losers to get to your big winner.
You see, big payoffs mean that you're going against
the odds. The vast majority of 'bets' are being placed
in the opposite direction. That's why the payoff is big
when you win.
Simple math.
But tough on your emotions.
Let me zoom in on a potential homerun that I've been
engaged to for the last couple of years.
IN NO WAY am I advising that you buy this stock. It's
highly speculative and you are, as stated above, more
likely to lose than win.
I give you this example so that you have a model of
what I'm talking about when I say you'll need patience.
For the last 4 years, I've been part of a future-thinking
think-tank. We meet in Palo Alto every January.
There, I'm exposed to up and coming technology before
it hits the newspaper.
The first year I attended, the main topic was 3D printing
and I was drawn to a technology that was mind-boggling...
3D Bio-Printing.
The company that leads the way in this tech is Organovo.
They produce bio-identical human cells...
...there bio-identical skin assays are used to test cosmetics
...there bio-identical liver cells are used to test drugs for
potential side-effects.
Although the above 2 products are availaable now, it's
still slow in acceptance. This company has not had a
one-million-dollar revenue year yet!
Eventually, though, the tech will be able to produce bio-identical
human organs for transplant.. and no rejection because
the genome series will be taken from the patient first and
then the organ will be printed.
Amazing, right?
Well, the stock has gone from $4 in 2013 to 13 on their
original product release and it is currently trading at...
$2,24 !!!!!
If you buy this stock for the long term... like 5 or 10 years...
you're going to have to be patient.
But, you see, I have belief in the technology and I think
it's a home run.
1000 sharts bought for $2,240 will morph into $100,000
if the stock hits $100, which seems possible to me if they
stay on track with the tech.
If I find 20 stocks with home run potential, and invest
$2,000 in each on only one of them 'hits', the 40K I spent
on all of them nets me a 60K profit when that one stock
hits for 100K.
And the other 19 are not ALL going to go to zero. They'll
be some return from some. Negative return or otherwise.
But the key here is patience. You MUST be a disciplined
trader!
Some may say my example is an 'investment', not a 'trade",
but frankly I don't see the difference in today's marketplace.
That's for another discussion.
Bottom line, if you're going to be a homerun hitter with
part of your portfolio, know that...
= you'll strike out A LOT of patience
= you'll need a plan (criteria for purchase and hold time)
= most of the news around your holding will likely be negative.
Hope that helps some of you to get grounded when it comes
to swinging for the fences.
And, as always... Stay Disciplined!
My best,
Norman Hallett, CEO
The Disciplined Trader (need a simple trading plan? Try these)
The Disciplined Trader, 6606 NW 66th Avenue, Parkland 33067
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