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WOULD YOU DO THIS ?

WOULD YOU DO THIS ?. Definitely Marry your First Date Stick with your BetaMax! Live in One House for Life Keep that Old Car !! Never Switch Majors Stay in your Bad Relationship NEVER Change Jobs THEN WHY SWALLOW “BUY AND HOLD” ?. SELLING WELL: PROBLEMS AND SOLUTIONS.

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WOULD YOU DO THIS ?

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  1. WOULD YOU DO THIS ? • Definitely Marry your First Date • Stick with your BetaMax! • Live in One House for Life • Keep that Old Car !! • Never Switch Majors • Stay in your Bad Relationship • NEVER Change Jobs • THEN WHY SWALLOW “BUY AND HOLD” ?

  2. SELLING WELL: PROBLEMS AND SOLUTIONS

  3. Don Cassidy Senior Research Analyst Lipper, a Reuters Company 1-877-955-4773 1-303-537-0860

  4. WHY SELLING WELL IS CRUCIAL Things Change! Limit Losses Capture Unreasonable Gains Perform in Range-Bound Market

  5. WHAT WE DO Trade In the Problem Car Sell the House and Move Quit the Job Burn/Donate the Leisure Suits Change Majors/Colleges Pull the Starting Pitcher Separate/Divorce … but HOLD the bad stock!

  6. LIKE A WINNING SPORTS TEAM • Good Defense First • Then Good Offense

  7. “Time changes men, but it does not alter our opinions of them.” - Marcel Proust …LIKEWISE FOR STOCKS -Don Cassidy

  8. FALLACIES in B&H Even zealots blink at the bottom! Pretends commissions/taxes are the main problem Assumes BUY decision was perfect Pretends no inflated price is too high Hopes bad companies will mend Ignores emotional extremes

  9. DETERRENTS TO OVERCOME Long-term Trend IS up Fits non-judgmental culture Pressure to avoid mistakes (closure ends hope) Intuitive contradiction: selling on good news! Scary market, or company factors?

  10. “Control your emotions, or they will control you.” – Sun Tzu, Chinese Military Scholar as quoted by F.J. Chu, inThe Mind of the Market

  11. Rational Theory: Economics Finance Accounting Security Analysis Human Realities: Anthropology Psychology Sociology Behavioral Finance Integrates

  12. BEHAVIORAL FINANCE’S INSIGHTS re SELLING Endowment Effect Cognitive Dissonance Disloyalty Avoidance Decision Stress Avoidance Reinforcement Comfort Seeking Closure Avoidance Perfectionism Vividness of Evidence/Social Proof

  13. BEHAVIORS NOT TO IGNORE “It’s Different this time!” Other Rationalizations Celebration Behavior Loud Media Drumbeat

  14. Classic Rationalization: “It’s different THIS time.”

  15. MORE NOT TO IGNORE Widespread Self-Confidence Advertising Playing to Aggressive Strategies

  16. Watch the Crowd !“Madness is the exception in individuals, but the rule in groups.” - Nietzsche

  17. FOUR SIGNS TO WATCH…* Mutual-Fund Net Flows * Humor* Advertising* Market Headlines off the Business Page

  18. New Yorker Cartoon Count Bullish Percent and Total Number 1995: 100% (1) 1996: 63% (8) 1997: 50% (14) 1998: 46% (13) 1999: 70% (33)

  19. New Yorker (continued) 2000: 25% (16) 2001: 4% (25) 2002: 0% (25) 2003: 0% (7) 2004: nmf (n=0 !)

  20. VERY Quick Tour: 1999-2003

  21. Chart-Visible Reversal Clues Unsustainable Slope +/- Acceleration +/- Volume Crescendos Volume Spikes (yes, technical analysis; sorry!)

  22. SPIKES – the ‘inverted V’

  23. ”

  24. BE CONTRARIAN AFTER A MOVE Yes, It WILL Feel Uncomfortable… (and that’s a good thing!)

  25. ANOTHER KEY REVERSAL SIGN Calls for More gold @ $850 tech stocks will double again recently: oil price  $100?

  26. Good Selling: To-DOs Have a sell plan when buying Spend Equal Thinking Time Use an A-A discipline Assume change! Give up on being perfect Watch Behavioral Signs of Highs Sell on first to speak: fundamentals OR technical analysis

  27. Selling: Operational Level Date, don’t marry, your darlings Graciously accept unreasonable returns Sell volume crescendos Sell spikes immediately (Internet compression effect!) Believe the cockroach theory! Keep a notebook on yourself

  28. STOP AND LIMIT ORDERS * Enter target sells using P-S-T * Your cost not a valid factor * Stops not at arbitrary percent down * Use chart patterns to set stops * Avoid the bad odds of EPS time! - admittedly, more practical for smaller portfolios

  29. Good Selling: DON’Ts List Don’t view sale as permanent verdict Don’t confuse stock with company Don’t Fixate on meaningless numbers Don’t Rationalize Don’t reach for one more day or point Don’t sell @ open unless the bad news is corporate cancer or scandal Don’t lower or pull stops Don’t let taxes rule thinking

  30. Cassidy’s RULE OF 3-4-5-6 STOCKS RARELY RISE, IN A ROW, MORE THAN… 3 Years 4 Months 5 Weeks 6 Trading Sessions

  31. Don’t Over-stay!Comfort is always greatest when danger of loss is largest. We perceive risk180 degrees backwards.

  32. The 3 Big Take-Aways UN-Fixate on Fundamentals and on Being Perfect Think ‘Human Behavior’! -- Watch Volume. Play COUNTER to Crowds. -- good defense / good offense

  33. THANK YOU ! Don CassidyAuthor: Trading on Volume

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