TRADING TRUTHS TO THINK THROUGH
Trading Truths...
Things to Understand...or at least Consider:
• Education is expensive, but the cost of education for each individual can vary from person to person. One should think of a dollar amount that is reasonable for his/her education and decide if the cost of that education is worth it in the end. Bottom line, what is YOUR profit/loss of this specific education?
• Once you decide that this cost is reasonable then another decision must be made to do the things that you are taught almost religiously. You have to decide to make achieving a successful life your absolute obsession and practice the principles you learn over and over again. Reggie Miller did not become the NBA’s most prolific 3-point shooter overnight, but the hours upon hours he spent in a gymnasium shooting the ball did make him history’s best. It should also be duly noted that he doesn’t hit every single 3-point shot that he attempts, nor does he hit every game winning shot…BUT…if the game is on the line and he has an open look then it would be safe to say that the odds are in his favor. THIS IS WHAT WE WANT!!! WE WANT TO PUT THE ODDS IN OUR FAVOR!!
• The best traders are minimalists. They find one or two (sometimes three to four) tactics or techniques that work consistently for them. Once they’ve found them, they simply implement them over and over and over. Repetition really does have value, especially when you get to the point of trusting yourself.
• Do not waste too much time looking in the past. Use the past to study from and correct mistakes that were made, but the past will never help us as traders. Approach the market with a forward-looking view that extends over the next two days to two weeks. Focus on the “here and now”.
• Do not put too much emphasis on your first block of trades. In fact, the worst thing a trader can experience is immediate success. Think about this concept and consider why this may be true.
• When you have finally convinced yourself of your trustworthiness then a game plan should be written out in your mind. Once that game plan is out in the open it must be followed. Do not allow yourself to commit some of the famous trading blunders, such as: switching time frames, ignoring stops, trading a stock with a stock price lower than your personal comfort zone, or after experiencing a strand of unsuccessful trades you convince yourself that the technical analysis you were following is a farce to. Stick the plan!!
• If you are a "swing trader" then you are not a long-term trader. The astute trader knows that the odds of being right over the next few days, as opposed to the next few years, are immeasurable greater. Never forget the fact that good traders, in their most basic form, are really masterful odds players and only play the trades that they feel have the highest probability to succeed.
• The desire for certainty is a trap into which many traders continue to get caught. But it must be realized that certainty can never be found in life, nor can it be found in the stock market. The search for certainty carries with it a burden. We must lift ourselves of this burden in order to trade more freely and more objectively. Seek better odds, not certainty.
• Make no mistake about it...emotion is the one thing that can make us stronger or cause our demise. We can have all the tactics, techniques, tips, and tricks we can handle, but if our mind-set is not right, if we do not possess the right equanimity, the proper and much-needed mental clarity, we will undo ourselves every time. If you’ve experienced four losing trades in a row it is imperative to go into trade number five as if none of the past trading history even happened. If the residue of the four previous trades carries over into trade number five then you are already trading with a handicap. Trading is hard enough! Don’t make it any harder by allowing your emotions to dictate your plan of action!
• The management on your losses is what makes all the difference in the world between a winner and a loser. The hallmark sign of a seasoned trader is small losses. If your losses are consistently miniscule then you must be doing something right. What could you be doing right if you are losing small consistently? Winning consistently in the stock market is directly related to how successfully one loses…or put another way…knowing how to lose correctly is the cornerstone of any successful trading methodology. If you do not know how to lose, you might as well pack your bags because your days as a trader are numbered.
• Keeping a detailed trading journal is tantamount to successfully learning from your mistakes. D.H. Lawrence once said, “If only one could have two lives: the first in which to make one’s mistakes, which seem as if they have to be made; and the second in which to profit by them.“ By keeping a trading journal you will be able to see the big picture and earmark any specific problems that you may be able to see that are consistent with your losing trades…and visa versa.
