Investor Profiles by Level of Patience

The stock mar­ket is a device for trans­fer­ring mon­ey from the impa­tient to the patient”

War­ren Buf­fett

Our old pal War­ren is right on the mon­ey. But as in every­thing else in life, there’s a nuance. In my expe­ri­ence, there are five dif­fer­ent lev­els of patience:

Patience ranks:
Very impa­tient: you open a trade. As soon as it goes against you, you close it.
Impa­tient: You set a stop loss based on how much risk you can take. Some­times you adjust the stop loss because you don’t want to close the trade in a loss.
Some­what patient: you set a stop loss based on your risk tol­er­ance. You don’t adjust the stop loss based on your emo­tions.
Patience Expert: you research a com­pa­ny exten­sive­ly before buy­ing its stock. You open your posi­tion and keep it open until you reach your prof­it goal or to reduce expo­sure. You con­sid­er clos­ing your posi­tion in a loss only if there are fun­da­men­tal changes in the com­pa­ny that force you to recon­sid­er your posi­tion.
Patience Mas­ter: you research a com­pa­ny exten­sive­ly before buy­ing its stock. You open a posi­tion and keep it open for­ev­er unless there are fun­da­men­tal changes in the com­pa­ny that force you to recon­sid­er your posi­tion.

Through edu­ca­tion, but most­ly expe­ri­ence, we can advance from the low­er lev­els to the high­er ones.

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