Avoid the woulda, shoulda, coulda and don't be greedy

This past August 2016 I bought some shares of Aurinia Pharmaceuticals (AUPH) at around $2 a share. It's not a normal trade I would make and it didn't get listed as part of the $1 per year stock alerts because it doesn't fit the Retire Earlier portfolio criteria for investing. I already had a some shares purchased at a higher price over a year earlier at another broker and I figured the drop in August wouldn't hold and it would climb back up. I was right and it did. But that's not all...

Originally when I made the trade, I quickly set a limit sell order for all those shares at $3, which would have netted me around a 50% gain. I let it set for a couple weeks, AUPH went up a bit but didn't climb to 3 and slowly fizzled back out again. I had other places that I wanted to invest this money, so I changed my limit sell to better reflect the same strategy I use with the Retire Earlier trading philosophy and locked in a small profit of about 3.4% and went on my merry way.

This morning...to my amazement, not only did AUPH pass 3, but it went on it's merry way up to $3.72 and has since settled at around $3.17 as I type this. I was shocked...but I am not mad. And I will not dwell on it. If I do this again in the future I would still do it the same way and here is why:

  1. These events are rare. Stocks shooting up over 25% are not rare and there are many that do so every day. But what is rare is that a stock YOU happen to be holding at that time shoots up that much (or more). The odds of someone being able to sytematically and continually make these types of picks and buy at just the right time are defintely against us.
  2. You have to be right TWICE. This is a big one. To make big money on a trade like this, you not only have to buy the stock at the right moment and at it's lowest (or close enough), but you also have to know when it's done going up. Guess what, you don't know either of those things. It's a crapshoot. If I had let my $3 sell order stay I would have made a really nice profit for a trade lasting less than 40 days, but I still missed the top by 72 cents or 44% in my case. Had I been lucky enough to set my target at $3.70 or so, I would have had an impressive 79% return on my original investment. But I was way off.
  3. There is another trade coming soon. AUPH could still go up on Monday and every day after that. So selling at today's high would still mean I would end up missing out on that money. Or it could have tanked and never had gotten any gain at all. For over a year AUPH had been going down, down, down from over $5 per share. So making the $2 trade after that huge drop in August was risky. It could have kept going down...then where would I be? That is why we lock in trades so tight when we sell shares within the Retire Earlier portfolio. We miss out on big upside swings all the time. Almost every time. But you know what else we do every time? We always make money. We haven't had a trade loss in our system since we started testing it out. It works. So we will gladly take our smaller gains, and immediately invest them in something else within days or less and compound that money right away. It's the only way we've been able to see such high returns that beat the stock market averages and indexes.

In my head, before I make any trade (buy or sell) I tell my self, "Don't be greedy". The reason that I do this is that I used to be greedy with my trades. I wanted to squeeze every last cent out of every trade. I made some really good money making some awesome trades and then I would think I could do that every time I traded and I lost a lot of money trying to do that. It's not possible. It was also really stressfull. I would get mad at all the money I lost and then think I needed to make it back and make another trade that ended up being twice as risky. Don't do this. Ever. NEVER DO THIS.

Since I started telling myself that and trading within the Retire Earlier parameters, my money just grows like weeds in my accounts. My stress is WAY less. And I can better handled the swings in the market because I know I am not being greedy and that my trading is not asking for miracles from the market. I know there is another good trade coming soon and that that trade will be done as well as the ones that preceeded it. I don't worry about money left on the table because I am always walking away from the table with extra money. I can't begin to tell you how amazing that feeling is and how much it makes me want to keep doing it this way for the rest of my life. I love what I do and I love how I do it. I hope you can learn to do the same.




Chris grew up in the United States but felt the world calling. After working throughout his twenties climbing the executive ladder, he left the corporate world in order to have the free time needed to focus on family more than money. Since then he has never held a regular job and spends his time honing his skills to make money grow on trees.He now travels the world with his wife and two sons.

Read more posts by ChrisW