Overcoming
Investment Fear
It’s not hard to say why I never really got into the stock
market before last year. I was afraid. Every penny
went to raising our four kids. I saw it
as success if we did not have a negative bank balance at the end of the week. I remember the garage sales and the trips to
the pawn shop just to get us back in the green.
Back in Georgia I did take $500 from a tax return and opened an account
with TD Ameritrade. That was back when
you still had to pay commissions. So I
opened the account, but 2 weeks later I needed the money, so I just withdrew it
all and closed the account without ever trading.
We were never really about the money either. We were living paycheck to paycheck and pretty
happy, but never wealthy financially. I
still find it hard to believe that for the 4.5 years when we lived in Georgia,
we only had ONE vehicle between us! Waiting
outside PCC for my wife to pick me up was just a thing we had to do
sometimes. However, there was a slight
fear of materialism that made me villainize the financial market and those who
were better off. In a way I had a fear
of success and a fear of investing. So
what changed?
Last summer, when I was filing taxes, there was a deduction
I could take if I contributed to an IRA.
It was the first time I felt like I had a few bucks to spend on it, so I
opened my IRA and then I forgot about it.
Friends at work were telling me about their investments, and I started
getting curious. A close friend shared a
link with me so that if I opened a Robinhood account, then both he and I could
get a free stock. I got 1 share of
WPX. That started me on my journey of
overcoming my investment fear.
Investing involves picking the right stock at the right time
at the right price, and then selling said stock at the right time for the right
price. There are a lot of similarities between
investing and gambling that are worth considering before investing. Can you deal with the stress of seeing your
stock price go down? The first week I
bought HGEN, I saw it lose about 25% in value!
I’m glad I did not set a stop loss or I probably would have just been
discouraged so much that I would want to quit.
Instead I rode it out. I added
more money to the account and bought down my average. In the end I saw it bottom out near a 50% loss. So in a 3 month period, I rode out a full
investment of HGEN seeing a 50% loss and then a 95% gain on my investment. As a side note, I don’t know if I will ever
use a stop-loss, just because I know they are often manipulated on low volume
days. Most people that use stop-losses,
set them to trip and sell at 10-20% loss.
Some stocks hit a 10% day loss a couple times a month, so setting a
stop-loss would be throwing money away in my opinion. So my failures have been good teachers.
Picking the stock: Predictability
breeds confidence. If I am looking for a
stock to trade, I want to find one that is trading near it’s low price and with
a large enough range to support a 3-5% 1-day growth rate. I am looking for something that also has a large enough trading volume, say 500K and up. By studying the individual stock historical
data downloaded from the Wallstreet Journal, I can check the range. By using TD Ameritrades free software,
ThinkorSwim, I can find stocks that are near their all-time lows and that have
traded large daily ranges.

Picking the right entry price: Trade within the historical data range. So I have picked a stock (WINT), near its
low. Now I want to set my entry
point. In the last week, the low from
open (LFO) has averaged 3%, so whatever the open is, that is what I will set my
limit price for. If it opens at 1.75, I
will set it for 1.70. If it is
increasing in value, then I will have to adjust to a 2.5%, so if it opens at
1.74 and it has had an increasing range of LFO at 2.6%, then I will set my
limit buy price to 1.70. I always target
below the open. If it doesn’t take, that’s
okay. When it does trade, then I have to
wait a day to sell.

Setting the right exit price: So the next day I set my limit sell order for
5% above what I paid, unless the range does not support it. The average range for WINT in the last month
has been 8% from previous day low to next day high, so 4-5% is a good target. So
I bought at 1.68 and sold at 1.75 this last time. If I had set my sell price higher, I could
have made 10%, but the odds of it selling the next day go down with each
percent that I increase the sell price.
If I want to make 20%, it will take a long time to hit that price. I am aiming to sell the next day, so I will
trust the data and get my 4-5%. I have done
that 5 times in the last 2 weeks!
Conclusion: Predictability breeds confidence and understanding how the
market moves is the first step to overcoming the fear of investment. If you trade, do your research, trust your
data, and start off small. Please do not
take this as investment advice, but as me sharing my investment journey. The market is a tool so that I can reach my
financial goals. Plain and simple. Happy trading!