Market Talk with Piranha is currently moving to its new home at chrisperruna.com. The new site is up and running but many of the posts need editing as the images and stock charts did not transfer successfully (thanks blogger). I will post all new entries to both blogs – Thank you for your patience while I make this change!

Thursday, December 30, 2004

“January Effect” – Ignore it!

…Why do you invest your hard earned cash in the stock market? Ask yourself this question. Please think very hard and write down your answer before you continue reading.

Is it for retirement, for income, for real estate, your kid’s education, etc…?
Whatever the reason, I am sure you have a set of rules to play by before dumping thousands of dollars into the market. If you do not have a solid set of rules to follow before you invest, how do you know when to buy and sell? Under what circumstances do you buy and sell. What are the determining criteria that you use to make those final decisions that can affect you and your family?

Here at MSW, we follow rules and we try to eliminate emotion or at least keep it a bare minimum which allows us to invest intelligently. Without our philosophy, we would be aimlessly throwing money in all directions, hoping and praying for profits. We would most likely listen to hot stock tips and jump on the bandwagon of every new trading system or theory that came across our desks and computer screens.

The point of this article is to remind our community members to steer clear of the hype behind so called special situations that don’t play into your developed trading system that was designed to fit with your personality and emotions.

I have been hearing a lot about the “January Effect” in recent weeks and I cringe every time I hear some talking head try to convince me to buy beaten down shares in companies that will bounce in the first two weeks of the year. I see too many people jump at the opportunity to change their investing beliefs because some guy on the other end of computer wrote an article claiming to make you lots of money in the first two weeks of the year.

Be strong and ignore the noise coming from every direction. Instead of looking into there theoretical bounces that may or may not occur, take the time to review last year’s trades and document the good and bad aspects of your portfolio. Look for your best trades and see why they were the best trades. Study your poor trades and understand where you made the mistake. Correct those mistakes in the coming year.

Be honest with yourself and note the areas that you need work and continue to polish your strengths. Don’t abandon what is working because a talking head on television tells you his system works in only 15 minutes per day two days per week.

Stick to one system that works and try to consolidate the strongest features of that system to your advantage and ignore the hundreds of other systems and indicators that can be found on every investing web site on the net.

We focus on price and volume here at MSW, which is all you need to become a successful trader. Establish strong or accelerating fundamentals and then confirm a quality trend on the charts and you will reap returns better than 99% of the general population.

Stay focused in the New Year, start fresh and think positive! Instead of reading 100 books this year on 80 different trading systems, reread a few essential books that focus on one system that best suits your style of investing.

Piranha

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