I’ve just launched a new edition of my book “Naked Trader” – edition 6.
It’s been five years since the last edition and I thought I would answer a question many have asked: “What have you learned over the last 5 years from talking to investors?”.
Here are 6 things I’ve learned.
1. I learned it’s important to have a plan if the market goes into meltdown for a while.
No one seems to have any idea what they would do in advance.
I meet and talk to so many investors online, at hotels, and on retreats and I know if I ask them what
their plan is for a meltdown the answer is: They don’t have one!
They just kinda hope it doesn’t happen.
But what if there’s a new and worse pandemic, or Trump goes bananas or China
invades Taiwan?
What if that nice 20pc you made this year evaporates all of a sudden?
For example, when the pandemic hit I immediately hit my “Black Swan” plan.
That meant cutting everything by half and taking out an index short.
One I like best is 3uks, it is an isa eligible ETF that goes UP a lot if the FTSE heads down.
If the FTSE goes down 10pc you could pick up nearly 30pc, a nice hedge.
I made more than 100pc on it fast during the pandemic, it saved my bacon.
More on this on page 277 of the new book. Make sure you understand how to use
it before pressing the button.
2. Investors/Traders hold losers for way too long.
I find trying to get people to cut their losses is very hard work.
They will just hang on grimly, and then buy more. They refuse to admit they made a mistake.
At retreats in Spain, I met people who had mega losers, some over £150k on just one share.
If challenged they say “It will come back” or “It is a coffee can stock”.
What has really happened is ego.
They can’t believe they were wrong and as long as they keep it they haven’t crystallised a mistake.
Worse than not selling is the averaging down.
People get into a worse mess doing that and will hold on even tighter.
3. Social media can be bad news.
When asking people where they find a share idea from, it’s nearly always from their
favourite on Twitter/X, Tik Tok or a discussion forum.
Hardly ever by doing their own homework by screening for shares.
For example, try ShareScopes’s screening tools or devise their own screens.
It means they are now emotional about the share because they start to follow what
their source continues to do with the share.
Usually, the source will carry on holding it through thick and thin.
If you sourced the share yourself from a screen and set a plan, you won’t have
so much emotion wrapped up in it.
My “Dash For Cash” screen for example is on ShareScope. This picks out shares with lots of net cash. A good starting point for a potential winner! You can read more about how I set it up and why here: The Naked Trader: A Dash for Cash Strategy
4. Making a plan and sticking to it is so important.
Very few I’ve met seem to have a plan.
It’s more finger in the air and hope.
What will you do if the share starts to tumble?
When will you take profits and why?
Every trade needs a plan: especially where to sell should it just keep going down.
Tons on planning a trade from page 174.
Which brings me to…
5. Not having a firm stop loss
Even if you don’t place a firm stop loss with a broker, at least set one and set an
alert should the share price get near.
If you haven’t decided before the trade when you will quit, then you probably will never quit.
I have come across those (mainly stubborn old investors) losing more than 80pc and still holding in hope.
Where should you place it?
Tons of stuff on where to place that stop loss in the book from page 180 and lots
of worked examples.
In the end, if in doubt, cut it out (of your portfolio).
6. Let the money come to you gently.
As the old song goes: “Don’t push it, don’t force it, let it happen naturally”.
I find too many investors want to make a million tomorrow and have no patience.
More so as new tech has taken a tenacious hold and influences boast how much
(they are not really) making on TikTok.
If you try too hard to make too much money too quickly you are probably doomed to fail.
I find people who chase it will tend to overtrade, overuse leverage and come a cropper.
Those who relax, have a plan, stick to it, and have a lot of patience will win.
Don’t try and be greedy, the market will make sure you won’t win.
Aim for 20pc a year. That’s great and doable.
If you aim to double every year, guess what? Your pot will probably halve!
You can buy Naked Trader 6 here: The Naked Trader: How anyone can make money trading shares – 6th edition
Robbie Burns
Robbie is an Isa millionaire who has written the best-selling “Naked Trader” series of books. He hosts online seminars and trader retreats in Spain. See his website nakedtrader.co.uk.
