5 Rules to Play the Long Game

Buy the business, not the stock

Never only invest in a stock but invest in the business. You are investing in a business and not just the ticket symbol of the company. Only invest in a business you understand.

In other words, before investing in a company, you should know what business the company is in.

Timing the market is futile

One thing that Warren Buffett doesn't do is to try to time the stock market. He has a very strong opinion on the price levels to buy and sell for individual shares, but he does not know if will go up or down. Majority of investors do just the opposite and try to time the market and try to make short term investing decisions because of this.

So, never try to time the market. In fact, nobody has ever done this successfully and consistently over multiple stock market cycles.

Investing Is More Luck Than Talent

When you try to time the market, you have two critical decisions to make. First, you need to know when to buy, at or near the low point in the market. Second, you also have to accurately assess the high point in the market and sell before disaster strikes and the market tumbles.

In other words, you have to miraculously know the market’s bottom and top to cash in on your strategy of timing the market. You have to be right about both, which is just not very likely to happen.

The market can stay irrational longer than you can stay solvent

You can be right that a market or sector is overvalued or undervalued but wrong on the timing. That's essentially what economist John Maynard Keynes meant when he said

“The market can stay irrational longer than you can stay solvent."

Stock Market declines always great opportunities!

If we look back at past selloffs, crashes and bear markets they always looks like good or great buy opportunities. However stick to fundamentals and invest in good companies with strong moats especially during difficult times and investors will be rewarded handsomely eventually as history has shown again and again.

Comments

Sell Put Spread Strategy on SPY To Generate Monthly Income

I was introduced into the world of Options Trading when I joined a Value Investing Course by a stock investing guru named Sean Seah . One was the strategies I learned from this course is called VIOS (Value Investing Option Strategy). This strategy aims to consistently make money by selling naked put options to collect premiums on fundamentally good stocks with minimal risk (worst case scenario you are forced to buy that stock if your option is exercised). Anyway I won't be talking too much about the Fundamentals of Options as you can find many free videos of these on YouTube and paid courses on Udemy. I have been selling mostly naked put options to collect premium for 4 years using the ThinkOrSwim platform and I was collecting good premiums making some small profit. One strategy I used was to keep rolling my option if it went In-The-Money (ITM) on expiration day . However I discovered that there is a huge risk involved with this Naked Selling Option Strategy even when...

Trading Journey [ Part 2 ] - Consistent Set of Actions

The month of March2021 had been a rather rough month for me. I lost 100% in my Sell Put strategy for SPY due to the crazy volatility caused by the 10 year yield scare. I have since adjusted my Stop Loss to be triggered at 250% instead to avoid being stopped out from price volatility. I closed my PEPSI sell put option by manual cut loss 21 days before expiration which ended up bring profitable if I didn't cut early...another reason to stick with the original game plan instead of tweaking my exit plan halfway after entering the trade. I just realized 100% losses from my bull put strategy on APPLE and JNJ. The losses was a bit hard to take and do I decided to take more risks by not sticking with my game plan for my overall trading strategy and added more options trades which did not follow my rules and went beyond my trading size. Once such trade is I did a SELL Iron Condor on Facebook when it was trading at $260. I looked at the chart and saw it was in middle a strong Re...

How to Add IV Rank Chart on ThinkorSwim (Using ThinkScript)

As I was watching an Options Video on Tastytrade's website, I discovered that IV Percentile on ThinkorSwim is really the same as IV Rank on tastytrade. What is IV Rank and IV Percentile? You can check out the video here from tastytrade: https://www.tastytrade.com/shows/the-skinny-on-options-data-science/episodes/iv-rank-and-iv-percentile-w-thinkscript-11-12-2015 I use IV Rank to determine when to sell and when to sell Options. For instance: IV Rank < 50% Action To Take : Buy Option Why? : Option Premium Cheaper, so we Buy Low and Sell High IV Rank > 50% Action To Take : Sell Option Why? : Option Premium Expensive, so we Sell High and Buy Back Low Since on ThinkOrSwim, the IVPercentile is the same as IVRank you can find the IV Percentile in the Trade tab under Today's Options Statistics : This is just a general rule of thumb but if the IV Rank falls within the above range, the probability of success to make money is higher. I use this determine when to sell and wh...

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