Time to Reflect

When I start to feel down about my failures investing I usually like to take up to a week to just process my feelings. That happened to me recently, as I had a swirl of emotions over my results so far this year.

The way that (SOL) has come apart really shook my confidence, it is a disappointing situation. However, with no intent to excuse any mistakes I make, I felt it was important for me to review my successes as well:

• I'm positive on my trading activity this year. My portfolio is down due to cost of my IBD subscription and the chart and screen tools. Based on stock trading only I'm up. Compare that to an 18% drop last year, and with how much worse the market has been this year, and that shows I'm making progress.
• I haven't lost capital in (SOL). Yes, I gave back profits, but I haven't lost capital and I have my stop set where I won't. My ratio of winners to losers is much better this year - my mistakes have cost me profits rather than capital.
• I haven't compounded errors. In the past if I started feeling stress about a loss or a position that was turning on me, I would look to put more money in play to 'make up for it.' This year I've shown patience and discipline. I realize the main goal now is to avoid catastrophic mistakes - the profits will come soon enough and more than make up for these relatively small gaffs.

With a return to a positive outlook I sat down and thought about how I can avoid being in this position again in the future. I've arrived on two main action items.

One is I am going to type up some sell rules and keep them with me at all times. It's not enough for me to have them in my head, I must put them down on paper and keep them with me. They are not 'mine' - in fact they are the interpretation of Bill O'Neil's CAN SLIM sell rules by a poster on the IBD forums who goes by the handle 'williamsj55.' So I'm using one person's thoughts on another person's ideas - which really came from several other people... This is not about reinventing the wheel. On the contrary, I'm looking for the tried and true, time-tested methods.

I will take these sell rules and modify them slightly to fit my style and trading personality, and then I think I'll post them here. As I've said before, it's good for me to put all my rules in writing here, I'm far more likely to follow them that way.

The second decision I made is how to handle SOL from here. I still think the fundamentals are there, but I can't keep sitting on this thing just waiting to see what happens, so I came up with a stop loss plan. It's really not based on anything technical, it's psychological. Each time the stock closes above a new dollar milestone, I move the stop up to $2 below and leave it there - no matter what. So, with it closing above 18 on Friday I moved the stop to 16. If/when it closes above 19, I'll move the stop to 17, and so on. This does two things. One - it relieves me of a decision and the associated stress. That's what I needed to move on from this one. It's mechanical from here. Second, if it does shoot up to 23 again, I won't watch it go back to 16 again - I'll stop out at 21 with a decent profit. If it retakes the 21/50 dma's and holds them for some time, I may consider treating it like a winner again, but for now it's just another tough lesson.

-Geoff