Fwd: Avoid Losses By Using the "5-Minute Portfolio Review"

---------- Forwarded message ----------
From: Rude Awakening <rude@agorafinancial.com>
Date: Fri, Aug 22, 2014 at 7:00 AM
Subject: Avoid Losses By Using the "5-Minute Portfolio Review"
To: iammejtm@gmail.com

What to do after you buy August 22, 2014     Avoid Losses By Using the "5-Minute Portfolio Review"   What to do after you buy Finding winners and losers Plus: One last chance...   Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner What do you do after you buy a stock? Do you keep an eye on the position every single minute until it's time to sell? Or are you like most people, neglecting the stock along with the rest of your portfolio? "Typically, investors spend too much time focusing on whether or not they should buy, and then move onto the next stock. Monitoring open positions is an afterthought," says trading expert Jonas Elmerraji. "At best, most people only review their holdings once a quarter when earnings come out - but that's a big mistake. You can significantly reduce the risks in your portfolio in just a few minutes." Jonas helps investors avoid major losses by using a "5-Minute Portfolio Review" just once a month. Today, I want to share this trick with you (If you're more interested in Jonas' "Zero to $10K" trading promise, click here to hop onboard while there's still time). The goal of the 5-Minute portfolio review is simple: you're taking a few minutes to take a look at the technical conditions of a stock. In general, firms only give their shareholders four meaningful updates each year (one look at earnings each quarter). Focusing on price, helps to fill in the gaps on a real-time basis. "When you conduct your own monthly 5-Minute portfolio review, you're essentially just trying to identify your winners and losers," Jonas explains. "That way, if you own a stock that looks like a technical loser, you've got a selling opportunity - after all, if you like the firm's fundamentals you can buy later at a more attractive price and avoid taking big hits in the meantime." The 5-Minute portfolio review takes just three simple steps for every stock you own. It's simple and quick. Here's how you do it: 1. The Chart To start your own 5-Minute portfolio review, the first thing you'll want to do is pull up a stock chart of each name you're looking at with any charting software that you prefer. When you pull up the chart, you're looking to get an overall picture of what's going on in the stock position. Is it going up? Is it going down? If you're more experienced with technicals, it's your chance to apply trendlines and support or resistance levels to your chart. "You should be looking for a couple of things: first, has anything big happened in the stock?" Jonas asks. "Major news items usually come with big price moves, so if there's something you've missed, you'll spot it quickly on a price chart. You're also looking for support levels - areas that shares have typically had trouble moving below. Support is a place where buyers are lingering for a buying opportunity, so nearby support reduces your risk." Here's a look at a nearby support level: See how $12.50 has acted like a sort of floor for this stock? If you own the stock, you know that there are buyers at this level. If a position has been trending lower without any nearby support, that's a red flag. You might want to consider selling. 2. Relative Strength You'll also want to look at a metric called Relative Strength. Relative strength looks at how a stock has performed compared to a big index - I usually use the S&P 500. "Relative strength does more than just tell you how your investment compares to the market," Jonas explains. "It also has considerable predictive power. A recent study showed that positive relative strength trends led to positive returns over a three to 10 month time horizon. So good relative strength helps to forecast good stock performance!" For relative strength, I'm looking for trends again. Is relative strength trending lower? If so, my stock is underperforming the market. Did an uptrend in relative strength get broken? If so, that's an early warning sign that my stock is going to underperform the rest of the market for the next three to 10 months. That's a time to consider selling, too... 3. The Question With those two steps out of the way, the final step is the most simple of all: just a single question Jonas asks about each and every one of his longer-term positions. After you've reviewed a price chart and looked at relative strength, you need to ask yourself... "If I didn't own shares right now, would I want to?" "The sad fact is that there are a number of biases that keep investors owning stocks that they shouldn't still own," Jonas says. "Confirmation bias makes investors focus on information that supports their holdings and ignore sell signals. Action bias makes investors feel like they should own stocks all the time. The endowment effect makes investors value their stocks higher than an arms-length buyer would." All of those pitfalls lead to losses. To avoid them, you've got to think from a different perspective. That's the entire point of Jonas' 5-minute portfolio review. It removes you from thinking that, "Company X could do this or that" and gets you thinking about what he stock is currently doing. With a little practice, you'll be able to complete all three of the steps in the 5-Minute portfolio review in just a few minutes... "If you're used to a buy-and-hold approach to investing, it's not easy to think outside the box and start using market data to make investment decisions," Jonas concludes. "But try the 5-Minute portfolio review for a couple of months, and I think you'll see that it identifies losers more quickly than a purely fundamental approach ever could." Still not convinced you can apply these trading tricks to your investments? Jonas has news for you--traders aren't born, they're made. Here's how you can start trading now. [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   You Won't Believe How Obama Made $9.2 Billion [must see] 6 Simple Steps to Turn $500 into a Fortune in One Year What NEVER to Buy at the Grocery Store     BE SURE TO ADD rude@agorafinancial.com to your address book.       Additional Articles & Commentary: Join the conversation! Follow us on social media:         The Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Agora Financial delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from The Rude Awakening, click here. Please read our Privacy Statement. For any further comments or concerns please email us at rude@agorafinancial.com. 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Jeremy Tobias Matthews