Transcript: CIBC Investor’s Edge — Greed, fear, hope, regret… repeat

[Title Name: Mark Herzog, CPA, CA, CFA - Head Global Markets Equity Trading, CIBC Capital Markets.]

[Music plays.]

[CIBC logo. CIBC Investor’s Edge - Greed, fear, hope, regret… repeat. A laptop opens and the screen shows various graphs and data.]

[A banner is shown with Mark’s name, title and a notice that this was originally aired November 23, 2022.]

[Mark stands in an office area and speaks. Beside him a list is shown, titled: “Trading psychology”. The bullet points show below this title one at a time: “Greed, Fear, Hope, Regret”. The list then slides off.]

The trading psychology, I'll get into it more in the next slide here. But these are the big ones that really drive people's emotions.

And I see it. I still can't get rid of these emotions myself, but if I have the self-awareness that I can feel them creeping up, I can use my process to keep that discipline at bay. So when I feel like, “Oh yeah, this is great, I'm never going to lose”, I'm like, “Well, nothing goes up forever”.

[A graph is shown, titled: “Tech (FAANG) stocks Nov. 2021 - Nov 2022”. The companies indicated are as follows, respectively: “AAPL, GOOGL, AMZN, NFLX, META”. To the right a line graph shows all companies starting at the same point and then they branch out, showing a basic downward trend over the months from November 2021 to November 2022. Each company in the order listed above, shows an ending point of: -5.74%; -31.45%; -46.28%; -51.86%; -62.93%.]

I mean, if you look at what we just went through with the tech stocks, or like the FAANG stocks, some of them are at 80%. So at the time, a year ago, I can guarantee almost no one would have seen that. Yeah, there’d be pullbacks, but it's there. So the greed, fear, hope, regret, again, that's why you need to have that discipline to get to a point to keep these emotions at bay.

[A new line graph appears. At the top is a blue box titled Share price. Graph shows dollar amounts ranging from $40 to $100. Below is a timeline of December to July. Beside it there is also a list of moods, including: “Euphoria; Thrill; Excitement; Optimism; Relief; Hope; Anxiety; Desperation; Panic; Capitulation”. The line graph starts at $62 in December and trends downward, then goes up ending at $58 in July.

The graph then extends to August, showing a steep incline with an arrow highlighting that direction. Next to the graph is a graphic of a red thermometer that shows where the top of the red is at Excitement, which is highlighted. Then the graph is extended to September, showing another sharp incline and the thermometer moves up to show Thrill as highlighted.

Then the graph is extended to October, showing a large incline and the thermometer moves up to Euphoria as highlighted. Then the graph is extended to November, showing a steep downward trend. The thermometer goes to show Anxiety as being highlighted.

Then the graph is extended to December and continues a steep downward trajectory. The thermometer goes down to show Desperation as being highlighted. With the graph continuing downward, Panic is highlighted, then Capitulation. Then towards the end of January, it starts trending upward and Hope is highlighted.]

So to me, the cycle of market emotions here, this is really the roller coaster of emotions. And I've been through this many times myself and I still work on it. And this is what you want to avoid at all costs because none of these here, optimism? It’s great. Excitement? It’s a great thrill as you're walking up there. Then the euphoria at the top, “Wow, this trade is amazing.”

And then all of a sudden it's down 10% one day and you're like, “Whoa, what just happened? This has been going up. What's happening?” And then it goes down 20%. “Well, I'm not going to sell it down here. It’s down 20%. Thing was just higher the other week and then it drops again”. Well, you know, you kind of panic, you know what's going on. You’re capitulating and then, “Yeah, this is terrible. I don't know what to do”.

And then you finally maybe you capitulate here or whatever happens, and then it turns around, you know, it's coming back up and that's really, “Okay, good”.

And that roller coaster is 100% the wrong way to trade. So how do you overcome those emotions? Again, you have your plan, your investing plan, your trading plan laid out before you execute. So again, any point along this trail where the price is going up, am I trimming into it, am I maybe buying a little more if it's early, where am I going to sell out? If I get in here and I'm wrong, where am I going to take a stop/loss and get out? Because I want to preserve capital.

[Trade smarter, not harder with CIBC Investor’s Edge.]

[CIBC Investor’s Edge is a division of CIBC Investor Services Inc. This document is provided for general informational purposes only and does not constitute investment advice. The information contained in this document has been obtained from sources believed to be reliable and believed to be accurate at the time of publishing, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates expressed in this document are as of the date of publication unless otherwise indicated, and are subject to change. The CIBC logo is a registered trademark of CIBC. The material and its contents may not be reproduced without the express written consent of CIBC.]

[CIBC logo. CIBC Investor’s Edge. The CIBC logo is a trademark of CIBC.]