The Biggest Reason Why Investors Never Become Rich
If you want to be a millionaire, that’s great. I wish you all the best of luck.
But you won’t get there if you don’t take the time to learn, practice, or even allow emotion to dictate how you trade. It takes discipline in the end. Without it, you’ll never reap the rewards that many stocks offer.
Trading successfully has nothing to do with the “perfect strategy” – which doesn’t exist.
It’s about the rules by which you abide by with each trade. Remember, any one can trade a stock. But it takes discipline and defined rules to trade that stock well.
Amazon.com (AMZN) is the perfect example of a lack of discipline.
In late October 2016, the company missed earnings with EPS of 52 cents, far below 78-cent estimates. Guidance spooked investors. The company now expected for fourth quarter revenue to fall in a range of $42 billion and $45.5 billion, slightly lower than expectations for $42.18 billion to $46.27 billion.
A negative herd sent the stock from $850 to $710.
But it was nothing more than an overreaction, as we pointed out on November 28. Undisciplined traders ignored the reasons for excitement.
Its cloud business is exploding, having just returned $861 million in operating income, more than doubling last year’s report of $428 million with 26% margins. Yet somehow the stock deserved to sell of by $140.
What others missed was our gain, though. Many forgot that more than 47% of holiday shoppers were likely to shop online this year. It was technically undervalued, having just begun to reverse on RSI, MACD and Money Flow at the time. AMZN could easily refill that bearish gap around $825, we noted, as well.
And that’s exactly what happened.
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Even here, others will tell you it’s overvalued. But in our opinion, it’s headed to $1,000 as it takes market share from struggling brick and mortar companies.
Don’t count the stock out just yet, though.
As others foolishly trim their price targets ahead of earnings again, the company shows no signs of slowing growth. Instead, it’s adding thousands of jobs. If they weren’t doing well, that wouldn’t happen. It’s also expanding its warehouses, so when it needs the space, it’s there.
Unfortunately, those without a plan or discipline missed the latest run higher. We, however, found opportunity when no one was looking.