The more I write about how other aspects of my life relate to common trading principles, the more similarities I seem to find. It is endlessly fascinating to me to watch how topics like following trends, managing risk, or understand your own personality apply to all facets of a productive and healthy life. In much the same way that a healthy diet and exercise can influence your trading. Perhaps your trading can influence your diet and exercise.
The Time Factor
After I wrote last week’s post about How Jesse Livermore Would Source Amazon Products, I went through and adjusted the prices on most of the merchandise I was selling. For many items, I found that I just needed to drop the price a few pennies to match the lowest offer and thus dramatically increase the odds of selling the product. In other situations, like for products that have been in stock since March and haven’t sold, I thought it made sense to drop the price to breakeven in order to dump the product.
After making all of these adjustments, a funny thing happened: things started selling like never before. By simply lowering the price a few pennies on my remote controlled batmobiles, I moved three of them last week (at a still ridiculous profit of $46 per unit, which only cost $26). I also got my capital back from a few items that didn’t appear to have any hope of making a profit anytime soon.
The more I thought about it, I realized that this is exactly how a stock trader would operate. If there is a dramatic change in a market after the trader initiates a position, his first instinct should be to get out. If I buy something that appears to be profitable on Amazon, but then the marketplace changes, I need to do the same thing.
The Frozen Surprise
Another thing that happened to me this week was that Amazon halted all selling of Frozen merchandise. I’ve been dancing around my basement like a damn fool singing “Let It Go” for about two month now because of all the Frozen stuff I have been selling, and now all the fun is over.
The problem is that I still have 15 puzzles, 2 MagiClip Elsa dolls, and three Young Elsa Dolls sitting either here or at Amazon. This sudden shock and likely loss reminded me of getting smacked by a stock that suddenly misses earnings and takes a tumble. Not only am I not going to be able to make any more returns from Frozen merchandise, I am also going to be stuck with the stuff I still have in inventory.
This is a great reminder that, just like in the market, I need to keep my exposure under control at all times. I was well aware that the bottom would eventually fall out of the Frozen bubble, but I figured it would be from a slowing of sales when the movie’s popularity slowed down. Didn’t think it would happen like this. Whoops.
Luckily, I’m not over exposed. I should be able to dump the extra stock on eBay if Amazon doesn’t allow me to resume selling soon. I have been reading about people who have thousands of dollars in Frozen merchandise that they are going to be stuck with. I am glad I diversified.