The Trade of a Lifetime & The Learnings That Came With It

I have been in the stock market for a couple of years now.

I started out with my best friend when we were 17.

In the Netherlands, you can only invest when you're 18 years old, so we had a shared account under his dad's name.

During my investing and trading journey, i came across many problems.

Such as the weight of your emotions when the stocks reach high levels or downturns for the first time.

My best friend and I bought a lot of stocks during the COVID crash of the stock market and made some money out of that.

But, we also endured the pains of a stock going down from 30% profit to a 60% loses.

I made many mistakes that cost me a lot of money.

like:

• Not taking profit when I should have

• Breaking my own strategy

• Not having a strategy

• Letting my emotions get the best of me

Now, I have broken even and I am still not good, but better than i was before.

The lessons I learned from the stock market were not to trade for any money i lost, that is how valuable the lessons are.

The lessons I learned from the stock market have also helped me in life.

Now, I will share some of those principles and lessons with you.

After this article, you will know more about:

• The power of compounding

• The rubber band effect in the trend

• Basic analytics

The Power of Compounding

The compound effect is one of the most commonly used long-term strategies in the stock market.

It is what made Warren Buffett as rich as he is.

What is the compound effect?

The compound effect is that small consistent action over a long period of time has greater pay offs than intensely large but short changes.

in a simple formula you can see it like this:

• SMALL, SMART CHOICES + CONSISTENCY + TIME = RADICAL DIFFERENCE

The small choices we make everyday impact the results we experience in the future.

At first, we won’t see the difference, 5 months or even a year goes by and everything may look relatively the same.

But give it two or three years and the differences can be huge.

You can use it with:

• Your wealth

• Your skill sets

• Your well-being

• Your knowledge

For example, if you invest 100 euros a month with a growth percentage of 5% per month, you will have 105 euros after the first month.

Add 100 and in the second month, you will have 215 euros, and so on.

Do that with everything in life and over time, your success will be endless.

I earned 3.3K a month in my first year without schooling, doing what I like.

This is the first year of my entrepreneurial journey!

The Rubber Band Effect

If you have a rubber band, it can stretch out.

If you stretch out a rubber band, it always needs to snap back at a certain point.

I call this the rubber band effect.

A stock is worth something.

You can calculate the worth of a stock through various calculations.

Which will show you the intrinsic value so what a company is really worth.

On the stock market itself, the same stock can be priced above or below its intrinsic value.

Yet, at a certain point.

When the stock is worth too much or too little, it has to snap back to its intrinsic value like a rubber band.

The same thing happens in life.

If something goes well, you know a setback is going to come.

And if everything goes bad, you know that at a certain point, it needs to snap back up again.

Somewhere in the middle when everything is going.

You know that you can go down or up because everything is currently stable.

Basic Analytics

You cannot talk about the stock market without discussing analytics.

In the stock market, you can have so-called trends: uptrends or downtrends.

In simple words, the line on the chart going up or down.

An uptrend is characterized by higher highs and lower lows.

A downtrend is characterized by lower lows and lower highs.

You can also have consolidation.

Which is a moment when the market fluctuates between up and down with the same highs and lows over time.

After consolidation, the trend can break out to the upside or downside.

Based on the charts, you can see what is happening.

In analytics, it is always your job to find out why it is happening.

For example, during the COVID market crash, the market was down because there was no trust.

So, my friend and I bought because we knew that when COVID was over, the market would go up again.

The reasoning behind the downtrend was no longer valid.

The market moves on emotion.

When there is money, people buy cars and houses.

When there is no money, people still need medical help.

Can you guess which stocks do a better job in bad times: medical ones or car companies?

You rationalize your questioning by asking:

• Why is this happening?

• What is the reasoning behind this?

• Has this happened before, and how did people respond at that time?

I use this way of thinking and analyzing in many things that I experience in life.

Am I on an uptrend in the things that are happening and experiencing, a downtrend, or a consolidation?

And then, I start asking questions and figuring it out.

A good thing to be conscious of is that the media and the majority of people are wrong most of the time.

Listen to what they are saying and why they are saying it, and then flip the script.

The trade of a lifetime

What we know now is:

• The power of compounding

If you do something long enough and stay consistent.

You can work your way up through compounding and stacking your knowledge.

• The rubber band effect in trends

When everything goes wrong, keep on going and the rubber band effect will take care of it.

When everything goes well, be prepared for the downfall.

Ride the rubber band effect with compound interest.

• Basic analytics

Check your trend and ask questions about why it is happening.

Improve what works and write a lot down.

In that way you can check what you did in good times and bad times.

Let luck work in your favor by cracking the code to it and analyze what is happening.

Don't forget to keep track of everything so you can look at your own data.

If you want more tools to compound, organize, and analyze your data.

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Keep on growing in your uptrend.

If you want more!!

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That's it for now. I wish you a good day - Job Baltes.