Like many rookie traders out there looking to make profitable trades on the ASX I have had my fair share of mistakes. Some of these mistakes are easily recognizable, some are not.
Some of my intial mistakes include:
- Assuming that the collapse of a share price indicates value buying opportunities. Assume NOTHING, BBI, VBA, ROC, VPG are all at close to 52 weeks lows and some historical lows. Does this mean they are value buying opportunities at these prices or does it mean the market is now accurately reflecting the company worth. I tend to follow the market knows best philosophy and look for future growth or potential that has not yet been factored into the share price to guide buying opportunities. However, the market can have a tendency to drag good companies down with the bad and these are definite potential buys when they have been oversold, case in point PNA and LYC at 9 and 12 cents respectively.
- Impatient buying on falling prices. Paid the price just a couple of weeks ago on this mistake. LYC was off 12% in two hours on a large drop for the ASX and jumped in on the basis that it would bounce of support at 42.5c only to find that support was smashed and 39.5 reached. When I look for potential daytrades and bounce trades I look for support levels to hold or for the bounce to begin for jumping on board. Don’t catch the falling dagger.
- Company announcements are just that, COMPANY announcements. Would you believe every word that anyone said, all the time? Didn’t think so. So do some research of your own into companies and their announcements before you buy or sell based on released information. Research everything you can get your hands on. From Directors and their backgrounds through to project success and failure rates. Information is everything, it’s your advantage and disadvantage. On the weight of information and evidence I always go with my gut instinct.
- Hot tips. Needless to say the only question I have for “hot tippers” is, how much have you got on it?
One of my biggest mistakes early on was becoming “married” to a particular share. What that means is that It became difficult to retain an objective point of view on the pros and cons after I had invested money into the share. I ironed this out quick smart. It leads to averaging down positions that shouldn’t be and holding shares that have become dog shares without realizing it. I never consider myself as an owner of a company but rather a speculator on potential price movements of a share.
Good luck.
