All Entries in the "Trading Psychology" Category
Never Force It
June 13, 2006 at 9:05 am
One of the lasting lessons my Dad taught me in golf was “never force it into the wind.” Growing up in Oklahoma and then playing college golf in west Texas, I can tell you that I’ve played a lot of golf in the wind. Headwinds tend to compound your errors by accelerating the spin on the ball, so what might normally be a slightly errant shot will often end up way off line into the wind.
Similarly, the market tends to compound our errors when we get too active under suboptimal conditions. Overtrading in a choppy market easily leads to poor performance, so the idea is to never force trades if they aren’t there. At some point, you’ll find a tailwind in the market which makes your strategy easier, and that’s the time you’ll want to be more aggressive.
By the way, subscribing to this RSS feed will mean you won’t ever miss a post!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Trading, Trading Psychology, Golf[/tags]
One Shot (Trade) at a Time
June 12, 2006 at 5:05 pm
Easy to say, hard to do! Golf is ideally played one shot at a time, taking each individual opportunity as one occasion to hit a shot you’ve practiced. Trading is so similar! Recent trades in which you turned a profit or a loss will have no impact on your next trade, but human nature leads us to think they may. Trading poorly can leave you timid and afraid of the next trade and the losses it may bring. On the other hand, a string of winning trades (good shots) can leave you overly confident and subject to the pitfalls of carelessness. Striving to take each individual trade as they come (one shot at a time) will help you find a balance between respect and confidence toward the trade you’re facing.
By the way, subscribing to this RSS feed will mean you won’t ever miss a post!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Golf, Trading, Trading Psychology, Winning Trades[/tags]
Very Superstitious
May 25, 2006 at 5:13 pm
There’s little controversy over the idea that trading is largely a head game. Throw in the spectrum of emotions which ranges from pure elation (home-run trade) to all-out fear (blown stop-loss), and there’s a lot of ground to cover. Somewhere in between the extremes is the topic of superstitions, and traders have a LOT of them! Those with risky jobs are the most likely to have superstitions or rituals in an effort to maintain emotional stability, so traders certainly fit the mold! What about you?
As a rule, I’m not a superstitious person. I’m not afraid to step on sidewalk cracks or walk under a ladder. I don’t carry a rabbit’s foot or consult my daily horoscope. I really just do my thing each day and try not to worry about the things which are out of my control, even though it sometimes rains after I wash my car ;-).
When it comes to trading, there are lots of opportunities to think that our actions lead to certain results. The only one I can think of for me is that early on in my trading career, I’d set my dream car of the week as the wallpaper on my PC. It was completely unrelated to trading, but somehow I found that about every time I’d do that, I’d go on a losing streak! I think it probably just made me overly aggressive in an effort to make the money to buy the car, but the result seemed to be poor trading. These days, you won’t find a sports car as my PC wallpaper, which is probably ironic coming from the guy who just claimed not to be superstitious! (Traders know when to break the rules, right?)!
I’ve seen and heard of some interesting trader superstitions:
– I knew one trader who insisted on using the same keyboard he started trading with, no matter which PC he happened to be using. There was nothing special about the keyboard of course, he just felt it was his connection to good trading mojo.
– One trader avoided the number ’13’ at all costs. He wouldn’t bid or offer at the .13 level, he wouldn’t take a 13-cent winner or loser when he wanted out, and he traded more carefully when it was the 13th of the month.
– Jim Cramer has mentioned wearing a lucky green shirt to snap out of a losing streak back at his old hedge fund.
What about you? Do you have some funny trading rituals or quirks like refusing to wear red when you’re long? Do you avoid specific restaurants because of the “poor track record” it’s left you with on trading days after eating there?
Let’s have a little fun with this…..if you’ve got some trading superstitions, post them in the comments section below and let the rest of us know if we’re missing out on something that works for you!
Have a fun & safe holiday weekend,
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
Great Expectations Series – Conclusion
May 18, 2006 at 9:33 am
The Great Expectations Series for traders has been fun to write and I hope you’ve gained something from it. The aim was to take a closer look at several aspects which combine to make up our expectations when it comes to trading. Although “expectations” could be interchangeable with “goals,” there is definitely more to the story! Let’s hit the highlights and wrap this up.
The Chameleon Trader
May 17, 2006 at 10:15 am
(This is Part 6 of the Great Expectations Series for traders. Be sure to read Parts 1-5 in case you missed them!)
In the wild, adaptation is the key to survival. No, I haven’t lived on the plains of the Serengeti or in the Amazon Rainforest, but I do watch Animal Planet and the Discovery Channel! Almost every program showcases a particular species which seems to fit perfectly into its environment, and by now you ought to be seeing where I’m headed with this.
Throughout this series, we’ve reviewed numerous elements which combine to form your expectations, but they’re all worthless if you’re unable to survive out there.
Successful trading requires adaptation. The market is wild, often running on pure emotion and very little logic. There will be times when you can do no wrong, but there will also be times when every trade feels like a struggle. Being willing to change, expecting change, and learning how to change will be the keys to your survival.
Your adaptation will be needed in a few areas: your method, your position sizing, and your personal spending. Let’s take a closer look at each one.
Eyes on the Prize
May 16, 2006 at 10:55 am
(This is Part 5 of the Great Expectations Series for traders. Be sure to read Parts 1-4 from the main Great Expectations Series page!)
What good is having a road map if you aren’t quite sure which direction to travel? Goals are underrated benchmarks which are entirely created by you. They’re the destinations you’ll be traveling toward on your road to profitability, so let’s jump right in and see how to blend them with your trading expectations.
It’s been said that “if you can see it and you can believe it, then you can achieve it.” In my own experience with trading, sports, or any other endeavor, I know this is true. There’s absolutely no substitute for having a target to aim at. While it’s good to keep your nose to the grindstone and have a trading routine, you’ve got to be able to look up and measure your progress. Knowing where you’ve been is only half of the equation…..you absolutely HAVE to know where you’re headed.
Knowing what you’re aiming for
The Other Side of Discipline
May 14, 2006 at 11:24 pm
The “D” Word is for both sides of a trade.
While taking small losses is widely accepted as the way to survive in trading, good discipline will serve you well on the profitable side of a trade too.
TGB is a little stock which just gave us a huge upside pop in spite of it’s low share price. I recently listed this small gold stock in the “Momentum Movers” portion of The Bandit Broadcast stock newsletter with a buy point of $3.50.
