[The Essence of a Stock Account] What is the true meaning of an insurance position?
Hello, this is Koyama.
During the COVID-19 era old dramas
are frequently rebroadcast,
Recently, TV Tokyo’s "Silent Voice"
drama was broadcast again.
The detective played by Chiaki Kuriyama uses not just intuition,
but relies on scientific evidence based on
behavioral psychology
during interrogations.
It is a suspense drama that
uses what people subconsciously show,
reading the other person’s truth from their gestures.
In the drama it was introduced like this.
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The human brain is divided into three main parts:
・ Brainstem
・ Cerebral cortex
・ Limbic system
Three major sections.
When you lie, the limbic system briefly shows an honest reaction.
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Even a 1/5 second of reaction, a tiny moment,
may involve nodding the head or
an instinctive reveal of one’s true feelings through gestures.
Also there are interesting stories
based on behavioral psychology.
For example…
“From a behavioral-psychology perspective, a pose that spreads the legs and puffs the chest
is a display of asserting territory, making oneself look bigger.”
And the toes pointed outward indicate
a psychology of wanting to leave here soon.”
（From Silent Voice Episode 1）
With knowledge like this
you might find from a wide range of situations,
including business, that you can see the other person’s true thoughts
and it could be useful.
Do you ever encounter scenes like this?
Many of you reading this newsletter probably think,
“I want to make money from investing.” But if you’re considering joining some investment school,
there are moments when you wonder,
“Is this instructor’s track record real?”
and you doubt it.
There are moments when you think,
“Huh, something this person says sounds dubious.”
There are many investment schools in the world, but,
unfortunately, some instructors pretend to profit from trading even though they don’t trade at all.
In discerning such instructors,
having a bit of behavioral psychology knowledge
may be helpful.
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A value system that is hostile to money
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That said, in reality, seeing through someone’s lies
is not so easy.
If everything from 1 to 10 is built on lies,
the truth would be exposed, but
if a lie contains about half truth,
it becomes particularly difficult to discern.
And how many people end up being deceived?
However, there is one thing I can say for sure.
Even if you can’t easily spot lies,
you can judge to some extent
whether a teacher has the capacity to earn money.
There are three key points to watch.
I have met countless people, both young and old,
truly a wide variety of people.
As a teacher of investing schools,
that number runs into the tens of thousands.
Some can barely earn 100,000 yen a month,
others regularly earn billions,
famous people,and indeed I’ve met a wide range of people.
I’ve talked with many people, and
among them,
I realized there is a value system that tends to make money flee.
There are three main categories.
From my experience,
even if you possess just one of these three values,
you are likely, nine times out of ten,
the type of person who money will run away from.
So, if a teacher who fits this description is in front of you,
I recommend you walk away immediately.
Now, what are these three values?
I wanted to tell you carefully, so
I recorded a video and uploaded it to YouTube.
↓
https://youtu.be/qok8mgYpghs
It’s a short video of about 8 minutes.
Please take a look.
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The Essence of Stock Aca: Explaining the Meaning of Insurance Position
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Well then, here is the main topic for today.
At the start, I spoke about psychology, and
stock trading and psychology are inextricably linked, and I think many people realize this.
Even if you learn a technique,
and cause you to lose capital.
Many people.
In particular,
those who lose money to fear are not rare.
Then, what is important to not be defeated by fear?
What matters is that the conviction
must outweigh fear. that I am making correct trades and will ultimately profit
If there is conviction,
you won’t violate rules or be swayed by emotion.
And, to have conviction
it is important to understand the meaning of the trades you are making.
“Why am I holding this position?”
Understanding things like this properly,is what to keep in mind.
Since it’s a good time, I’d like to share an example from the Stock Academy’s method
the idea of an “insurance position.”
An example of the meaning of holding a position.
I’ve mentioned this before, but
Stock Academy has the concept of an
“insurance position.”
(Note: The methods taught at Stock Academy involve
buying and selling on margin.)
For example you think the stock price will fall,
you hold three short positions with 500 yen increments.
500 yen short
1500 yen short
2000 yen short
something like that.
But the stock price rises further to
2500 yen.
When this happens, what would you do?
Many would think, “Surely it will drop soon,”
and
add more short positions.
In wave-trading, having four short positions with gaps is
not a violation of the rules.
However, it is not a safe trade.
If the stock price keeps rising with four shorts,
you may incur large losses, so
it is safer to add a“insurance buy position.”
As the name implies, the insurance position
is not a position to take profits from.
It’s a position kept in case of emergencies.
But if later the stock price rises again,
many people end up closing the insurance buy position to lock in profits.
The feelings of “I want profits quickly” or
“I’m afraid of high-price buy positions remaining when prices fall”
likely drive these decisions.
I understand those feelings, but
here is one thing I want you to consider.
What is the return of an insurance position?
Insurance, by nature, is something you prepare for worst-case scenarios,
so the true return is that there is no return at all.
When you buy insurance before an overseas trip and it ends up unused,
people don’t lament, “The insurance money was wasted (cry).”
In the same way, insurance positions are about being prepared for the worst case,
and lamenting that they remained unused is not appropriate.
If you truly understand this,
you will not irrationally close insurance positions out of fear.
To summarize again,
the point I wanted to convey today is
to properly understand the meaning of your own trades and
to overcome fear is essential.
Thank you for watching until the end today as well.
Keizo Goshou
