Some Random Thoughts:
Novices think that one day a switch magically flips and bam!, you're a trader. You just plan your trade, trade your plan, and let the chips fall where they may. It is that simple, but unfortunately, not quite that easy. No one is immune to the emotional ups and downs, even if you've been at it for a while.
"Everyone has a plan until punched in the face.*" That's why it's so important to have discipline, understand the nuances of your methodology, and put commitment devices in place to protect you from you.
We recently got "punched in the face" with GLUE. It came dangerously close to the protective stop (down nearly $1,700, based on the 100k model). Fortunately, it came back nicely, hit the profit target, and is now up nearly 40%. Holding through this wasn’t easy. And, I know, what would the world be without hypothetical questions? (Wright), but I do wonder if I would have succumbed to the temptation to exit at a loss (even though the stop wasn't hit) had it not been on my Trading Service. I was forced to follow the plan published. I can’t, in good faith, tell you to do something and then do just the opposite.
Hold yourself accountable. If you're super brave, have someone else hold you accountable, too.
In trading, there are more than 50 ways to lose your money. These include: sharpshooting signals, micromanaging trades, failing to honor stops, being influenced by extraneous factors, “confusing the issue with facts” (e.g., reasoning why a falling stock should be going up), and a host of other bad behaviors. The good news is that once you have a few trades under your belt, you'll be quick to recognize them. Like the cat in the PC, they will be obvious. The solution is simple: don't do that! I know, easier said than done! That's why, again, accountability and commitment devices are key.
I fleshed out all of the above in a lot of detail in this week's Dave Landry's The Week In Charts. Check it out and let me know what you think!
*Mike Tyson, also attributed to his trainer
May the trend be with you!
Dave Landry
