With the recent success of the Bitcoin market making mainstream media and even on some prime-time television shows, there is a significant increase in attention to market trading activities than usual. The last month, the hype train has been ripping hard through the marijuana sector and picking up a ton of passengers along the way. As a person who has money invested in a few of these companies, it has been very lucrative and exciting. But what I’m also seeing now is many people with no prior investing experience getting caught up in the advice by others to pick up marijuana stocks with promises to bountiful amounts of profits. What I fear is that people are jumping into this with no plans and no strategies, just expectations of profits. But at these current price levels, you need to have the realization that there are going to be downside risks from price pullbacks, negative news or some companies just not working out. You have to be able to stomach opening your trading account and see your investments down 30% and still make a rational decision.
Don’t get me wrong, I think we’re still early in the development of this sector and there is a lot of money to be made riding this wave, but there will be a lot of volatility and swings and I don’t think it’s going to be as straight up as the pumpers push on the forums make it out to be. At the time I’m writing this, just the Horizons Marijuana Life Sciences Index Fund has doubled since November. Look up any marijuana sector stock and you’ll see these beautiful exponential charts with massive gains.
But the last thing you want to do is to be the bagholder at the top of the chart, watching it go sideways or down and just crossing your fingers hoping that it’ll come back up to your price and rocket to the clouds. That is unless you have a plan and you are completely prepared to wait, not require the money to put food on the table, and are content with the potential risk of things not working out and eventually lose money on the trade.
It is easy to get caught up in all the excitement and have fear of missing out (FOMO). I even found myself pricing in orders for trades that weren’t following my usual tactics and strategies. I even got caught up hearing what others are buying and having those discussions influence whether or not I should buy something, even though they may be going against my own strategies or plans. I start to think “am I missing something?” or “is my strategy wrong?”.
The key though is that realizing that everyone has to have their own strategies because we all have our own individual financial situations and mental toughness to handle failures. Because when investing or trading, there WILL be failures. You will have trades that do not go your way. And when this happens, only you will be able to get yourself out of it so that you minimize the financial impact and also the strain on your mental state. Your strategies have to work with what you’re able to risk and how you can cope with adversity.
These last few days, as I see the marijuana sector soaring and because of my trade plan, I have locked in a lot of profits already and leaving a lot of money on the table, I couldn’t help but wonder if my strategies were flawed. But I came to a realization that, my strategies just made me money, a lot of it. Not as much as it could’ve been, but I still have more money in my account than I did before. That’s not all, I was able to stay invested with minimal stress. I know that for me, I do not do well with numerous repeated failures. I tend to go on what poker players call, “tilt”, and compound failures with more irrational bad decisions. So my strategies are set up to help me reduce the amount of risk exposure as quickly as possible and increase my probabilities for more positive trades than negative.
Investing and trading the markets is an endurance game and you need to know what works for you so that you can carry on in the future.
So before you go diving into the markets head first, please take a moment to really make a plan that you know will work for you. I lost a lot of money in the past when I made trades without a plan, and I hope to help prevent others from making the same mistake.
Million by 40
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