Everything Comes to He Who Waits

When trading, do you live in fear of ‘missing the boat’? How many times have you kicked yourself that you should have bought into the stock or other financial instrument that has just skyrocketed?

Even worse: how many times have you bought in after you have missed the boat, and after it has skyrocketed, out of fear of missing out on further gains? Or in a vain attempt to “get even” with the market for making you miss out in the first place?

As I explained in my trading trail article on The Ones That Got Away, I try not to go chasing after lost causes. Sticking by my rule of ‘never buying anything for a higher price than I last sold it’ usually serves me better than when I occasionally break the rule.

You see, if you simply sit and wait, the stocks (for example) that you missed have a tendency to come back to you more often than you might think. Eventually.

Let’s take Kesa as an example, and suppose that you (or more likely I) failed to catch the falling knife at its lowest point in October 2008. Actually, I did catch it in that case, but let’s pretend for the moment that I didn’t.

Clearly I had missed the boat on this one when the price subsequently soared by some three (or more) times between October 2008 and October 2010. I could have tried catching the ‘rising knife’ — if there is such a thing — only to have seen my fingers cut to shreds by the whipsawing price on the way up. And it turns out that I didn’t need to try desperately to get on board, because ‘everything comes to he who waits’. Three-and-a-half years after the lowest recorded price,  the price is now back to where it started — as you can see below.

I can now have another bite at this cherry, but of course I don’t have to if I don’t want to.

Although emotional words like ‘love’ have no place in the traders’ lexicon, it reminds me of a well-known phrase:

‘If you love it, let it go. If it loves you, it will come back.’

Kesa is not the only example of a financial instrument that has come back to ‘he who waits’, and there are many more examples over timescales ranging from days to years. Yes, I know that there are just as many examples of those that never come back down, but if you let them go, they can do you know harm… except by reminding you of how you “missed out”.

The even happier ending to this story is that we can stop pretending now; and I can tell you that I didn’t miss Kesa the first time around. I banked a profit the first time around, I waited patiently for it to come all the way back down, and now I have the option of doing it all over again by getting into the swing.

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.