Sunday, October 25, 2015

Deadly Mindsets that Traders Commit

Is it normal to lose in stocks? Yes.

This is the hard truth of the markets. From market 
veterans to newbies, everybody loses.

If winning 5-6 digits of profits was normal, majority of the people
 wouldn't dismiss snapshots with huge gains as heresy. 

Talk to those who worked as brokers and they'll tell you 
how unfair the world is.

But majority would easily accept a 6-7 digit loss because that's 
how the norm is. And there's a ridiculous culture of embracing 
this truth instead of fighting it.

Like when you fail in your tests and 
immediately look for your "buddies"

But while everybody has their fair share of losses, not 
everybody stay as losers.

Allow me take you to another wonderful experience in
 appreciating renaissance art and the truths of the stock market.
Today, I'd like to talk about the Common Deadly 
Mindsets that Traders Commit.

"Expensive vs Cheap" Mentality

You buy 100k Shares of Stock A for P0.10 
Instead of Buying 1,000 Shares of Stock B for P10

A lot of people fall for this one early in the game. Buying one stock
 over the other because it looks cheap price-wise.

Take this for example on FNI vs NIKL. Both are said to be 
Nickel stocks. And since FNI looks cheaper than NIKL you buy
10k worth of FNI shares on October 22.

Next day, NIKL rallies and FNI fizzles.
Your FNI's worth is now almost a hundred less.

If you only chose the more "expensive" NIKL you'd 
have gained five hundred more.

So what's the point of you having millions of shares on 
a stock but fails to show you a profit?

It's just showing off without having real substance.


Now a lot of people would also dismiss the idea of buying
 at All Time Highs (ATH) because of statements like 
"I've never seen this stock this expensive before!" 

I'm guessing some of these people have 
been telling that to URC since the 20s.

And a lot of people would nonchalantly buy stocks that have 
fallen 20-50% from their highs because "It's on SALE!"
Who doesn't love a good Sale?

I hate to break it down to you buddy but 
the stock market ain't like the Malls.

FNI MEGASALE at 2.55 you say?

 The reality is, there is no such thing as a cheap or expensive stock.
Only Winning or Losing stocks. 

"Paper loss lang yan!" Mentality

The non acceptance of a loss. This is the most common phrase you
 will hear when people cannot accept a loss. It's a way of fooling
 yourself to the reality that you lost your hard earned money
 - and that if you go long term, you'll be fine.

A lot of people would use the W. Buffet quote 
to defend their paper losses:

"Rule no 1: Never Lose Money
Rule no 2: Follow Rule 1" 

Well guess what?

You aren't lolo Buffet who was already a 
#richkid when he said that.

And this is usually the root cause of the next Deadly Mindset..

Averaging down and the Bodega Mentality

While this strategy works fine with those with lots of money
it isn't necessarily so with those with just a few

If you have less than 50M in buying power, why would you buy the
 downtrend when you can buy trending stocks that would actually
 grow your money? You don't have to always suffer first before 
you make profits.

And so whenever you feel like buying a down trending stock, 
may you always remember this image:

Now what happens when you combo the last two deadlies?

You'd probably end up having this Wrong Mindset:

"It's too deep to cut!" Mentality

Have you ever had losses that reached more than -30% 
in your port? Painful right? 

"But maybe. Just maybe" you think to yourself, one day, you will
 be liberated from all this pain and some magical rally would
 happen. It's possible. And out of your desperation you do a lot
of meaningless stuff like research about the company you 
'invested' in. Hell, you even know the name of the CEO's dog!

You also believe whatever the Gurus say even though you 
know deep within yourself that what they say is crap.

You had a lot of opportunities to cut your losses.
 So why didn't you?

I'm pretty sure your losses didn't grow as it is overnight

It's hard to swallow a loss. But what's harder to swallow is your 
pride and ego. If you only admitted that you were wrong, 
non of these terrible things would happen. 

So cut when it's still early and remember:
 your pride, ego, and laziness won't feed you.


To end this post, they say 99% of the people who traded and
 invested in the stock market lose. And only 1% thrive.

So If you want to be part of that 1%, 
then don't do what the 99% is doing.


  1. prior on this blogs ..I found myself sir ZF na hindi ko kayang gayahin ang sinusundan ko before .same as your qoutes ." You aren't lolo Buffet who was already a #richkid when he said that....and this new mentality came to me as my new sword of comeback ..again same as your qoutes " If you have less than 50M in buying power, why would you buy the downtrend when you can buy trending stocks that would actually grow your money? You don't have to always suffer first before you make profits.. Thanks ZF and God bless you more and keep all that wisdom be shared as mind opening blogs for all of us newbies ....oditbar

  2. This comment has been removed by the author.

  3. fpj stock, pabogbog daw muna #gigols. di showbiz ang stocks. wonderful ARTicle papi..wonderful inded. :)
    naalala ko tuloy yun pinag gagawa ko nun :D

  4. Guilty of all! Even though I already knew before that I was wrong in holding FNI, I still refused to cut because of that bullshit mindset of not wanting to lose money. I didn't want to realize my 10k paper loss back then, so I just crossed my fingers that price will reverse soon. Months passed and the paper loss just ballooned until I can't take it anymore. I raised the white flag last week. Can't say that I feel good now. I would be a hypocrite, especially if you lost almost 20% of your port. Oh well, at least I learned my lesson now. I'm never gonna listen and follow blindly again to anyone - even to an investment banker with 20 plus market experience (I wonder if that experience really involved actual/real trading).

  5. It happens again to me this time. Actually it's the 3rd time now since 2010 the year i started investing in stocks. 1st is CAL. I become greedy. Cut loss with -45%. I've read somewhere- "he who fights and runs away, lives to fight another day". It took me 6 months to regain my losses. 2nd is FNI, cut loss at -35%. I have just regain the losses and here again the 3rd time - HVN. Buy high sell low. Ipitsky. Wala pa rin kadaladala. But i'll never give up on stock market. Stocks investing/trading have helped me a lot in my other financial obligations. This is my business now. I'm in the process of realigning my forces. The sun will always shine after the storm. THANK YOU ZF, because there is one thing i have learned in reading your blogs but sometimes failed to do, is the 4% cut loss level and to cut without mercy. Well at least i cut HVN today at -12%.

  6. Points to Ponder! Sapul... Salamat Boss Z..warflip

  7. hahaha. SGI ang nag lagay ng espada sa leeg ko. -25% loss total port

  8. kung nabasa ko lang ito noon pa siguro hindi ko naranasan ma loss ng 60% sa total port ko. salamat boss zee i learn a lot simula ng magbasa ako ng blog mo. at ibang zft like money growers and kapitan kidlat video

  9. I used to have these mindsets before. Every beginner went through these frames of mind. Thank you for this post sir Zee, I always go back to this whenever my decisions seem too clouded. You are a blessing, sir Zee. I hope that you continue to share your market experiences to those who are thriving to reach financial freedom. May God bless you and your family more.