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Showing posts with label contra. Show all posts
Showing posts with label contra. Show all posts

A trade or an investment?

Saturday, December 26, 2009

If a counter we'd bought into moved up within the first three days, should we do a contra and sell off or should we hold on? The answer would depend on many things. One is whether we'd bought into the counter as a trade or as an investment.

If it was meant to be a trade, we should sell and, actually, what we would receive is free money! We did not pay a single cent and we would just receive an angpao for buying the right stock at the right time.

If it was meant to be an investment, then, it usually means we should be prepared for a longer holding period. It usually means that we saw value in a stock (i.e. it was a bargain). Usually, we would form a fair value for the stock in our minds and would not liquidate (not 100% anyway) unless the fair value was hit.

So, if we sort out our motivations each time we buy into a counter, our strategy would become clearer.


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