FOMO and regret for missing a trade

This week I posted my first analysis piece on trading view on Piermont Lithium (PLL) – you can see the analysis here – and it was a bit of an interesting experience. Mainly as I looked back and saw the absolutely stellar gains the stock made over the last 5 months (it went from $0.04 to over $1) and has been a 25 bagger if you got in just before the run and likely even more if you got in over the past 2 years or so.

​After completing the analysis piece, I thought to myself, this is probably one of the stocks I traded when I first started. As a way of the background when I first started trading, I almost exclusively traded small-cap ASX stocks in the first hour after open (the so-called amateur hour, of which I was one). I used to take big positions (100,000+ shares) of stocks below $0.010 and hope that they would run up a few bpips (not that I knew that’s what they were called then) and make a couple of hundred dollars per transaction; sometimes I’d trade the same stock, 10+ times in that one hour, all manually, no stops (I now look back at this, and think how lucky I got initially).  

During my recollection of how amateur I was when I first started out, I thought what would have happened if I had just held PLL over the last few years and not tried my hand at trading. I suspect that I would have made a lot of money, however, to me there are some pretty dangerous assumptions in this.

1. The first problem with this is that when I was scalp trading ASX stocks, I was trading way too large and making entry decisions based on the most active screen of my brokers’ app, I wasn’t investing per se and PLL would have been pretty unlikely to appear on my watch list if I was focused on investing.
2. Having capital tied up in a trade, which was essentially going no where for 2 years.
3. There would have been a lot of luck involved in picking PLL 2 or 3 years ago as an up and comer, lots of similar stocks and have pumped and dumped numerous times over.

I
guess, in essence, whilst I might regret not staying PLL, most of this analysis mentally is made up by looking at the trade in hindsight and seeing the could have been scenario, completely ignoring that it was at odds with my trading system then and would have been at odds with it now too for that matter.

So I guess why is all this relevant, from my personnel experience and that in the dozens of trading books I’ve read, managing FOMO and regret are absolutely keys to managing your trading. If you give in to either of these emotions, your likely to start making bad trades (that is, trades that are not within your plan/strategy), some might make you money, but they won’t help you in the long term. Basically to mind, giving in to either emotions is basically self-sabotage to trading and an absolute no-no if you want to stay in the game long term.
So to stop myself from going down that path, again, I now use a number of techniques that I’ll now share:

1. I remind myself that when I chase a trade or FOMO into it normally leads to a crappy result, so don’t do it.
2. FOMO and regret don’t feature on my trading plan.
3. Remember that a good trade is like a bus, if you miss one, another one will be along shortly (I read this in a book, It might have been one of the market wizards, however, whoever said this has never waited for a Government Bus in Sydney if you miss one another one might turn up if your lucky… well at least that was my experience)
4. Stick to plan, remember that you have an edge (which, as far as I’m concerned, really comes down to exiting and consistently entering positions, but that’s a whole other blog post).
5. Remember that you never know how a trades going to go, looking at a potential trade with hindsight is just not productive.

Basically in summary, when I feel FOMO or Regret rearing their head, I tell them to bugger off as I know that its going to affect my trading and start destroying my consistency.

Cheers for now,

Nick the Trader Guy
March 2021