"Four mistakes preventing consistent market gains" - David Paul : VectorVest UK

let's talk to David Paul he is the MD of vector Wester UK very common with you young David morning us right we've got a lot of slides to whiz through let's kick off heckle ID for mistakes preventing consistent market gains well yes these are four mistakes that I've I've been involved with both retail institutional portfolios well since I suppose know about 1990 and I've noted these four mistakes coming up over and over again at both retail and institutional level and hopefully knowing about them we can get our minds around them a little bit so the

four mistakes the first one which is in the next slide I think encompasses many of them and I've entitled it thinking of the money first you may say to yourself well were the only reason we're going to anywhere near market is to make money and that's certainly true for every profession but most of you think of the best dentist in your area yeah with the biggest cure and a practice full of a waiting room full of customers that gentleman has built his business up because he focuses on perfect execution of each procedure and if he

takes care and focuses on perfect execution of each root canal his waiting room will be full and he can pretty much charge really wants and it's exactly the same in trading our objective as traders is to focus on perfect execution of this one trade not worrying about the past not thinking about the future but following our simple set of rules on this one trade and if we focus on perfect execution and if we focus on the process of trading the cash will take care of itself and when you allow your mind the luxury to move

to the past in the next slide you can become incredibly emotional and our minds have been hardwired to relive the past and we've also been hardwired to avoid pain so your mind relives the past it wants to avoid the pain and you find out making a multitude of errors mostly hesitating I'm not taking the trade that you should take so as far as I'm concerned the key to the exercise and exactly the same way as the key to playing good golf is to focus on perfect execution of this one stroke not the last one not

the next one and the difference between a really good golfer and yours truly is that he can lose a few strokes on the fourth and on the fifth he plays that as if that's never happened okay focuses on perfect execution of this one stroke and the rest of the errors are in fact are part of this one but on the next slide I think the next biggest error is buying stocks that are falling we have been we've been sort of coached in this component cost averaging etc and it may work in exchange-traded funds it may

work in unit trusts but my word it can give you hiding and stocks in South Africa and Germany for example there's a company biggest mattress producer in the whole world called Stein off and last but this time last year it was trading inside I forget 120 brands a share it fell to one run fifty a share during the course in the last year so a feud both that falling I'm not saying for seconds you don't buy a pullback I pull back in a strong trend that can be a great entry point and as I've told

you I think a couple of meetings ago I like to look at three moving averages 21:55 and 89 I'm on the twenty ones above the 55 which is above the 89 I've got a share in a strong trend I'm buying a little bit of a pullback in that but it's great but if it cracks the 89 day moving average and I start to get worried and buying stocks that are falling has bankrupt the old two for the price of one has bankrupted more traders than anything else at that okay so let's move on to the

next floor well then actually of course as a part of that as well just holding on to losers too long yes where you get emotionally a married to the thing and even worse of course is adding to those losers along the way and in the UK remember more corny remember that I go Lucia fell from 13 pounds but if you yeah so holding on to losers too long and I took me a long time to find that fella in the t-shirt but holding on to losers too long and then the last big mistake of course

in the next slide is well no exit plan that's a part of that but the last big mistake and the next slide is in fact not focusing or not being aware of market direction and well the market is rising or falling everything follows from that and it's like a roller coaster that I've put in the next slide I think takes one heck of a long time to get up there but falls very fast indeed yeah so we've been coached again the buy-and-hold is the only way to go I remember when I started in markets it

was my mentor at the time told me that when markets made a peak in 1970 it took them 21 years to actually get back up to that level again in real money so buy-and-hold is just great if you've got many many years to wait nevertheless add vector-based or motto is that we want to buy shares with great fundamentals that are rising that are in this throes of a strong trend and we want to buy them when the general market is rising so we're very very aware of market timing and we have market timing tools for

traders if you want to be swing traders want to be spread betters and we've got market timing tools for our long term position traders and that just shows the American market the pullback to 2003 then what's now called the global financial crisis and we've now got a market which is still rising and it's still in our view a bull market fundamentally a low there was a furrow in the paper last weekend that the dye had pulled back and it only pulled back to the low of about ten days ago so it's hardly a bear market

as yet announced decade a much more serious crack but our fundamental model based on the work of dr. Bart the leader who's the founder of vector vest based on earnings interest rates and inflation still tells us that we're in a u.s. bull market understood okay so let's move on next slide well I I'm gonna ask you must which one of those four mistakes has cost you much most money over the years so I think a combination of everything to be honest like you you clearly remember your losers very very well in terms of you know

their heavy losses I won't comment too much holding on to losers III yeah and averaging the wrong way yeah I started in markets in in 1982 and between 1982 and 1984 I put together quite a large sum of money that you know stood over that time for that time of my life yeah quite a large sum of money and when I started I knew nothing I was a mechanical engineer and you nothing about markets two or three years into the process I was no guru I thought that I knew something and I became attached to

one particular share and I just watch it fall and fall and fall and by 2019 84 I pretty much given away all I've made in the previous two years and that was a that was a I was living in Johannesburg at the time I remember going out to a mountain outside Johannesburg and sitting and meditating for a full weekend to make sure that that would never happen again so I managed to cure myself that very painful experience but there as far as I'm concerned an awful lot of investors are cards and traders of cuts and

the following as far as I'm concerned is the Holy Grail the spread betting companies themselves say that only about ten or fifteen percent people make any money with them and they've got that in their adverts these days and I've looked at the winners and I've looked at the losers and it's quite simple the winners in fact think quite differently from the losers now when a losing trader has got a winning trade they when they're got a winning trade they very quickly become pessimistic they become pessimistic that the market is going to snap their money away

yeah and well a losing trade losing trader has good a losing position they become optimistic they become optimistic that the darn things going to turn around no winning traders simply think differently when a winning trader has got a winning position they become optimistic and when they've got a losing position they become pessimistic very quickly so my challenge to everybody listening is that on your next trade or your next investment become aware of your thinking if the thing goes your way do your best to become optimistic and let the darn thing run if the thing doesn't

go your way become pessimistic very very quickly indeed now if you're honest and you examine your thinking about 90% of the people out there that try to be traders and try to be consistent get that the wrong way around and I've changed more traders around by making them mentally aware that little switch than anything else so if you want to be successful and you've got a winning position when you have a winning trade become optimistic and when you have a losing trade become pessimistic very quickly 90% of people get that wrong okay we've got two

slides to go well our general market is heading down again right it's been as you can see we had good times and since June 2017 the road has been rocky we had quite a nice move up from April this year 17th of April but the longer-term trend and the shorter term trend on the London market down and so time to be watching stop-loss is very careful and not to be entering any new positions in a review understood and the photo slides well that's david dot pollard vector viscom we're going to be at the investor show

next Friday at the Novotel in Hammersmith anybody will have a stand there and I'll be speaking I'm speaking twice during the course of the day and anybody wants to come along it'll be great to see them and I'll be talking again about that what I call the holy grade which holy grail of trading which is that little mental switch that we spoke about a moment ago well I think the only thing I would add to that is make sure you do your homework and be prepared