Ok so I guess you are wondering what in the wide world of sports could the word “holistic” have to do with trading stocks. Well grasshopper, let me explain.
We hear more and more these days about “holistic medicine” where the approach is not to treat the symptom, but rather to treat the entire patient. Which in of itself, will always give the patient a far better, more complete diagnosis.
So then, let’s see how this can apply to trading stocks. And this really was another “ah-moment” for yours truly.
I come across a stock I really like, and find it’s been beaten down 30% in the past month. Hmmm my first impression, this stock is sick, best to stay away.
I come across another stock and it’s up 30% in the past month. That’s what I want, a stock on the rise!
In both cases, I was looking at “the symptom” and not the bigger picture. So then, let’s take a more holistic look at these stocks.
Upon deeper examination my first stock was actually down because the entire sector it is in had been side swiped of late, driving them all down. In fact nothing in particular about this stock warrants it declining.
The Lesson: Just like real estate, I am best to find the most beaten down stock in a great neighbourhood. If it’s the gold and mining sector, then find the stock with the most promise, that has fallen out of favour for no reason, other than it was in that neighbourhood or sector. Sooner than later it will likely have the best chance to appreciate simply by association to it’s peers.
The second stock was up 30%, and the truth here is, the soon to be released news has driven the stock to very frothy and unwarranted levels, based purely on speculation. Sure you can be a winner here, but if that news release doesn’t deliver, your stock’s share price could easily drop off a cliff over night.
The real point here should be obvious. You simply can not buy any stock, short or long term, day trader or value investor, without a little further digging. That digging I call Holistic Trading. Yes, sure it’s more work on your part, but hey, it’s your money, and holistic trading becomes a mini insurance policy if you like.
You should never buy a stock on rumour alone, or on news alone, or on volume alone, or any number of reasons that are taken in isolation. If you can’t tell me at least 3 reasons why you should buy that stock, then you simply have not looked deeper or done your “holistic” homework.
I am a firm believer that holistic trading is healthy trading. And when I need to look a little deeper into the mining, oil and gas stocks I like, I always use the Stock Research Portal.
The site is free with an email subscription. The depth of information available will make you a smarter investor. If used properly, smarter, healthier and in the end, wealthier as well.
About The Author: Mike Perras is a former media executive and faculty of business professor. Today he is a freelance writer and also manages the Canadian Stock Alerts blog. It is updated weekdays in real time, and the primary focus is to find stocks with higher than usual trading volume. Mr. Perras doesn't advocate buying the stocks he mentions. Nothing in this article is either designed to meet readers personal financial situations, or intended or taken to be investment advice.
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