2 Types of FOMO - Trading Long Mitsubishi Heavy

An example of my trading psychology and approach via 🇯🇵7011 Mitsubishi Heavy

Today:

NKY nearly +2% at the close, recovering ~½ of yesterday’s losses with 77% of stocks on Tokyo Prime index positive vs 20% declining, 2% unchanged.

Leading the charge:

🇯🇵7011 MITSUBISHI HEAVY INDUSTRIES: +8% on the day to new record highs, and pulling TOPIX Machinery as the top performing sector on the day.

🇯🇵7011 MHI is now +177% for ‘24 YTD, and +15% just in the last 5 trading days (including the broad 🇯🇵equity sell off)

🇯🇵7011 MHI shares were also the most heavily traded among Japan equities with notional turnover volume > 2x every other single stock, and even outpacing 🇯🇵1570 NKY Levered ETF trading activity - so there is buying conviction behind the move beyond just the algo flows

I’m now out of the long position from yesterday’s market on open entry upon anticipated indiscriminate sharp downside (as discussed w/ Michael Gayed live stream yesterday).

2 points regarding 2 types of FOMO in trading: 1) FOMO to open a position, and 2) FOMO to close an existing profitable position.

1) If you have FOMO (on anything), but are not actually acting upon it, that’s generally speaking a good thing- not buying/chasing at runaway highs and not caving in at some arbitrary point of your own “can’t just watch it rise any longer without owning it.” But then- if there is some market technical / mechanical broad indiscriminate sell off which presents a rare entry point - you have to be psychologically ready to act, if not HAPPY to do so, as this is the moment you’ve been so painfully but patiently waiting for (and this is obviously subject to the broader prevailing trading/market conditions).

In other words, your Fear Of Missing Out shouldn’t exceed your fear of going against broad market fear.

2) The other FOMO that doesn’t get any attention but is equally important: Fear Of Missing Out on FURTHER gains by not closing an existing profitable trade. Unfortunately I actually don’t have much to add here from myself because I personally don’t ever get that sentiment (thankfully) - this is not some “flex” brag or whatever, what I’m saying is that because I don’t truly know what that fear of selling too soon, or feelings of “loss” after a profitable trade is closed and the market keeps going (i.e. “exited too soon/left money on the table” etc), I can’t genuinely relate, and therefore have no “authority” in discussing what other’s genuinely do feel. All I can say is what I feel, which is - why care about what something does if I no longer have exposure to it - (which is my point- many people DO care, and so for me to say “just stop caring after the trade” is just useless commentary).

What I will say is that when it comes to a highly volatile or fast-moving trade that can lose -100% and/or return in multiples (including options trading), my core philosophy and approach going into those trades is not to “make __%” or what have you, my objective is to get to a level of gains where I can take my entire principal amount off the table, and still have exposure, but now with just house money on the line (i.e. now completely insulated from any losses). In other words, I’m trying to “own XYZ for free” - and since its house money, I care FAR less about what happens, and therefore can withstand a lot more portfolio volatility (which is not the same as general “market volatility”).

But for non-hyper volatile trading, such as the long 🇯🇵7011 Mitsubishi Heavy in/out trade-

For FOMO type 1) You can see in my market commentary + video with Michael Gayed on the day of - I clearly state that I am looking at the NKY futures plunge as an opportunity to take advantage of babies thrown out with bath water. So I’m ready willing and happy to buy into anticipated volatility - my “fear” was that the market would stabilize immediately, or not drop far enough.

For FOMO type 2) Why close the trade so soon - even for short term trading, MHI shares can go even higher following newly elected 🇯🇵PM Ishiba press conference and potential hawkish China / pro-🇯🇵 defense spending commentary coming, can’t they? Yes obviously they can, in fact, I expect they would. Do I care? No, I absolutely do not care - and not it’s not (just) because I don’t care what anything does after I’m out of it.

It’s because the purpose of my trade wasn’t based on fundamentals of bullish Japan defense sector - it was to just play what I saw as a temporary market aberration of a NKY-standalone technical sell off, and to identify / own that which will outperform when it reverses. And when that came to fruition, my reason for opening the trade was realized, and so I no longer have a reason to own MHI under this approach, and so I’m out.

What happens afterwards has nothing to do with my original intent- and so I truly do not care. IF I held onto it, and it went further upwards (which, again, is what I expect), then that wouldn’t make me feel good- quite the opposite, because whatever __% up could just as easily be the same sized move but DOWNWARDS, and those swings are not related to my original trade intent.

I have fear of buying when green and selling when red- I have to trade against market direction.

If you watch even my prior live streamed video with

Michael A. Gayed, CFA

which was during the AM trading session of 🇯🇵Black Monday (Aug 5) when NKY was -11% and getting halted, you’ll see me say that I was scrambling to BUY/EXIT my existing shorts that morning.

In case you missed it- here is our live stream from yesterday:

https://www.youtube.com/live/uO6H95q2oAA?si=lGjHcplZ9sv74upQ

From 🇯🇵Black Monday:

https://www.youtube.com/live/IT_pP8VHTZs?si=JKNbnK1hIusyy6C4

Thank you as always,

Weston