Clarity.

Timeframe

Most investors and traders would be so much better off if they built clarity around this one question:

What is the timeframe i am operating on?

On the portfolio level everyone is operating on a multi-decade timeframe. But what timeframe are you operating on when buying individual stocks is a key question which can solve many of your problems.

Answering this key question with clarity for yourself, can give you superpowers when making decisions. When i say clarity i mean, clarity about the truths as it pertains to that timeframe.

If you're clear that you are a intraday trader what you need to bother about is vastly different than if you are a swing trader and its even vastly different for someone who is trying to make multibaggers.

The risk-reward for an intraday trader is probably 0.5%-5%, for a swing trader it may be 3%-20% and for the one who is looking for a multibagger it may be 30%-300%.

Given the above risk-reward, the position sizing for each of them is going to be vastly different. So while an intraday or a swing trader is very conscious of the drawdowns and has ways to avoid them, the multibagger investors needs to understand that for them drawdowns of 20-30-40% are a feature, there is no running away from them.

You manage (not avoid) such drawdowns using position sizing, diversification and other varied strategies.

Now the problem comes when the multibagger investor wants to have the drawdowns of a swing trader but the returns of a multibagger. That is just not possible.

You can't play this game to make 2x-5x-10x while hoping that you will exit with a 10-20% drawdown.

A lot of tweets around current valuations are happening, some for and some against. But essentially the mistake is to think that you can attempt to make multibaggers while avoiding the pain by magically exiting at the "right time". Have my cake and eat it too mindset. And that's where most investors are getting nervous, confused.

But the reality is that if you have clarity around what timeframe are you operating on and stay true to the realities of that timeframe, it will take away a lot of stress.

Think about it. Happy to answer any questions in the comments.