Hi, it's long weekend and just want to get some feedback on this thought experiment:
Let's say you have $10,000 and you want to start a new stock position, you have done all the DD, valuation and whatnot. So on a red day, you put in the order, how much do you typically start? 10%? 25%, 50% or all in?
As soon as you entered, there can only be two outcomes – (1) Stock goes up or (2) Stock goes down. How do you mentally handle these two outcomes?
If you start with 10% and it goes up, are you kicking yourself for not starting with more? What if it goes down, are you kicking yourself for not waiting a little bit longer?
After that, we must decide on the next order. If it goes up, do you chase it with another 10% or wait for it to drop back to your entry price? If you chase, do you increase the order to maybe 15% or 20%, since you “missed” the cheaper price earlier.
If it goes down, I guess the decision is easier, obviously you can treat it as a discount, but do you put in another 10%, or “learned your lesson” and put it less, like 5% since you “paid the price” of impatience in 1st round.
As a pessimist, it seems no matter what I do, it's always wrong. Could have bought more, should have waited longer etc. I actually have a fear that, even if I'm lucky enough to catch the bottom, I would still question myself why I didn't wait a bit longer, or why I didn't find a bit more fund to buy more.
How do you guys turn this “hobby” into a more positive enjoyable experience?
For context, I have bought SPY from $455 all the way to $363, now my average is $392. I didn't wait for the bottom, I continue to average down (or some call it “buying the dip”), and increase the order size for every 10% drop, and I only buy when the price is lower than my last purchase. So my trade days were 1st MAR, 7th MAR, 26th APR (yes a long wait), 29th APR, 2nd MAY, 9th MAY, 20th MAY, 13th JUN, 14th JUN, 16th JUN and 17th JUN. I supplement this with a small amount of UPRO, whenever there is a dead-cat-bounce or bull-rally and the UPRO turns green, I'll sell it all.
If I had waited for the soon-to-come bottom, my AVG would still be around $440. Now I'm comfortable that the loss is less than 10% and I will try to make sure SPY doesn't stray more than 10% from my AVG, which means I'll continue to buy more lower. On red pre-market days (which are lower than my last purchase price), I usually place orders of increasing size capturing -2%, -3%, -4%, -5% and -6%. It will be quite nasty if SPY drops more than 6% a day, and my orders will ensure I always buy the bottom and keep SPY within 10% from my AVG.
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