{"id":31260,"date":"2012-07-31T10:10:31","date_gmt":"2012-07-31T10:10:31","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/07\/zynga-when-you-lose-control-of-your-emotions-its-time-to-stop-trading\/"},"modified":"2012-07-31T10:10:31","modified_gmt":"2012-07-31T10:10:31","slug":"zynga-when-you-lose-control-of-your-emotions-its-time-to-stop-trading","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/07\/31\/zynga-when-you-lose-control-of-your-emotions-its-time-to-stop-trading\/","title":{"rendered":"Zynga: When You Lose Control of Your Emotions, It\u2019s Time to Stop Trading"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

One evening two years ago, I logged in to Facebook ($<\/span>FB<\/a>)<\/strong> to upload new photos of my son (if memory serves, he was bouncing in a Jumperoo) and I got an announcement that John had just planted corn on some videogame I had never heard of.\u00a0<\/p>\n

Why anyone <\/em>would have found that piece of information interesting was beyond my comprehension, but before I finished uploading my photos I had received no fewer than nine other status updates.\u00a0 James milked a cow.\u00a0 Irene made plum wine.\u00a0 Kate built a barn.\u00a0 And all of them were requesting that I join them on Farmville.\u00a0<\/p>\n

In the weeks that followed, I changed my Facebook settings multiple times to block the status updates, but they somehow found a way to keep coming.\u00a0 It was a losing battle.\u00a0 I finally succeeded in blocking Farmville, but then I started getting invites for CastleVille and CityVille.\u00a0 Susan just built a skyscraper.\u00a0 Great.<\/p>\n

I defriended the worst offenders and changed my settings\u2026again.\u00a0 And yet they still kept coming.\u00a0<\/p>\n

When I found myself fantasizing about committing horrendous acts of violence against the makers of these videogames, I decided it was best for my mental health to quit using Facebook altogether.\u00a0<\/p>\n

I tell this story for a reason.\u00a0 My blind hatred of Zynga ($<\/span>ZNGA<\/a>)<\/strong> and its games made trading the stock a bad idea.\u00a0 Yes, I missed a great short opportunity, but sitting this one out was the right thing for me to do.\u00a0 When you lose emotional control, you lose objectivity.\u00a0 And there is no faster way to ruin yourself in the capital markets.\u00a0<\/p>\n

Fear and greed drive markets, but don\u2019t forget how powerful an emotion hate can be as well.\u00a0 When you are able to maintain emotional detachment\u2014embracing your inner Spock<\/a>, if you will\u2014you can trade the emotional impulses of others in a contrarian strategy.\u00a0 But when you find yourself legitimately hating <\/em>a stock as if it were an old enemy with whom you have a blood feud, you\u2019re no longer thinking rationally.\u00a0 You\u2019re not looking at the numbers, and you\u2019re setting yourself up for failure.\u00a0<\/p>\n

Think about talented short sellers you have met, traders who have been in the business a long time.\u00a0 You will never<\/em> hear them say things like \u201cI hate<\/em> this stock\u201d or \u201cI want<\/em> this to fall.\u201d\u00a0 They keep a level head and stick to their trading rules, or they don\u2019t survive long in that business.<\/p>\n

Emotional detachment is equally important on the long side, of course.\u00a0 I consider Peter Lynch\u2019s advice to \u201cbuy what you know\u201d<\/em> to be some of the most dangerous advice ever given because it requires a level of emotional control that so very few people have.\u00a0 \u00a0The fact that your neighborhood Starbucks ($<\/span>SBUX<\/a>)<\/strong> is your favorite hangout doesn\u2019t make a good or bad investment, but it can cause you to lose your objectivity.\u00a0<\/p>\n

To be sure, an investor can learn a lot by visiting local stores. But you have to make a herculean mental effort to prevent anecdotal data\u00a0 from feeding a confirmation bias that essentially tells you what you want to hear.\u00a0 If you\u2019re already a Starbucks bull, you might notice that the lines seem longer than usual but fail to notice that customers have traded down from venti size to tall, and vice versa for a Starbucks bear.\u00a0<\/p>\n

Returning to the theme of hatred, we should also consider the peculiar case of sin stocks<\/a> and particularly tobacco stocks.\u00a0 I don\u2019t know that there has ever been a more despised industry in history.\u00a0 But investors who hate tobacco for personal reasons or avoid it due to moral qualms create trading opportunities for the rest of us.\u00a0<\/p>\n

The historic tobacco stock underpricing has gone into reverse this year, and Big Tobacco giants like Altria ($<\/span>MO<\/a>)<\/strong> and Philip Morris ($<\/span>PM<\/a>)<\/strong> are among the best performing.\u00a0 Whether this is simply a temporary phenomenon created by the current low interest rate environment remains to be seen, but the behavior of sin stocks is still something that every investor should study (see “The Price of Sin<\/a>“).\u00a0<\/p>\n

I\u2019ll finish this with a confession.\u00a0 After writing several hundred words in this article about the need for emotional control, I still hate FarmVille.\u00a0 Just writing the word brings a sneer to my face and causes my heart rate to rise.<\/p>\n

I have no business trading Zynga stock.\u00a0<\/p>\n

\u00a0Disclosures: Sizemore Capital is long MO.<\/em><\/p>\n

If you liked this article, consider getting Sizemore Insights via E-mail.\u00a0<\/strong><\/a><\/em><\/p>\n

No related posts.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter One evening two years ago, I logged in to Facebook ($FB) to upload new photos of my son (if memory serves, he was bouncing in a Jumperoo) and I got an announcement that John had just planted corn on some videogame I had never heard of.\u00a0 Why anyone would have found … <\/p>\n

Continue reading “Zynga: When You Lose Control of Your Emotions, It\u2019s Time to Stop Trading”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-31260","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/31260","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=31260"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/31260\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=31260"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=31260"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=31260"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}