All Entries in the "Trading Psychology" Category
The Edge of Greatness
May 8, 2006 at 11:52 am
(This is Part 3 of the Great Expectations Series for traders. Be sure to read Part 1 and Part 2!)
Your expectations of success are rising now that you’re going about it systematically. You’re aware of your resources. You’ve decided on a timeframe. You’re even keeping tabs on what’s working on your timeframe (as well as what isn’t).
SO, how much longer until you make that first million?
Blending Your Style With the Current Environment
May 4, 2006 at 7:19 pm
(This is Part 2 of the Great Expectations Series for traders. Part 1 can be read here.)
So you’ve taken a personal inventory in Part 1 and looked at your resources (time, money, personality and tolerance for risk). Now let’s move a step further and look at how you can blend your resources and style with the existing trading environment.
[Note: The phrase “day trading” is often used to replace what should be described as “active trading.” For the purposes of this blog, “day trading” will simply be used to refer to a timeframe of trading, meaning any trade which is opened and closed in the same day is a ‘day trade.’ Many would-be traders expect that merely having time available to trade actively each day must mean they should day trade. I disagree. Just because you have all the time in the world doesn’t necessarily mean you should become a day trader!]
Once you’ve determined the timeframe you ought to be trading, get connected with other traders. Networking with other traders to find out what seems to be working is a great way to stay focused on blending your style with what the market is currently offering. More importantly,
Personal Inventory
May 3, 2006 at 10:21 am
As we begin this Great Expectations Series, I think it’s important to start out with a look at your own trading resources. At first glance, we think only of money available for trading, but it goes far deeper than that.
All traders can benefit by taking a personal inventory of not just their capital available for trading, but their time, their personality, and their tolerance for risk. Even veteran traders are wise to periodically check their situation to confirm that their current methodology is best for them. After all, it’s difficult to set (or adjust) expectations for yourself unless you’ve examined your resources closely.
Great Expectations Series – Introduction
May 2, 2006 at 8:38 am
Welcome to my Great Expectations Series on trading!
Whether you’re a beginning trader or a veteran, there’s something every trader has in common – an expectation of where we are headed. Yes, goals are certainly part of our expectations, but there is much more to it than merely goals. Working toward meeting your expectations will require that you take stock of where you are right now, structure the proper trading plan of attack for you, and then setting up the details and goals as you navigate your way down the path toward profits.
So in the coming days, we’ll take a closer look at topics that relate to our expectations when it comes to trading. We’ll do more than scratch the surface of each one, hopefully, without getting so deep that we lose our focus,
How Much?
April 24, 2006 at 9:45 am
Compounding money has been called the 8th Wonder of the World. It truly is amazing what can be done when you make regular incremental gains. It is no wonder then that successful active trading should include an understanding of the best ways to size positions properly according to your trading method in order to maximize profitability. I’ve known plenty of brand new investors who had just a small amount of money which they piled into one idea all at once. However, the experienced trader knows better than to do this with his entire trading account, so let’s explore this topic a little further!
Check Your Rolex
April 18, 2006 at 1:36 pm
There are traders and there are investors. To me, the primary difference is the timeframe you operate on.
One of Stephen Covey’s 7 Habits of Highly Successful People is to “begin with the end in mind.” This is a key element of planning a trade (or investment), as only knowing your timeframe will allow you to accurately evaluate your position. Covey goes on to provide some great advice, which can certainly be applied to trading…
“To begin with the end in mind means to start with a clear understanding of your destination. It means to know where you’re going so that you better understand where you are now so that the steps you take are always in the right direction.”
Deciding what kind of trader you should be depends on your timeframe as much as it does your personality. What kinds of trades do you prefer to take? Have you determined which trading strategies are right for you? Buying pullbacks within an uptrend? Short selling stocks on low-volume rallies right up to resistance? Or are you a buy-and-hope hold investor looking to be the next Warren Buffett? Your timeframe is the deciding factor.
Investors will often include fundamental data in their trading strategy and execution plan, knowing that the performance of the business behind the stock they own can have an impact on how the stock moves over time. Such an impact is not usually very quick (unless it’s earnings season), and as a result, investors know that their timeframe must be long enough to allow their fundamental thesis to pan out.
I’m a trader, and to me, short-term price action is more about supply and demand than the fundamentals of a company whose stock I’m trading. Business doesn’t usually pick up or fall off overnight…it takes many weeks and months and years. My trading timeframe ranges between several hours up to a couple of weeks. This normally excludes almost any fundamental impact on the stocks, because I’m swing trading the supply and demand shifts.
So whether you’re just starting out in the market and selecting a trading style that suits your needs, or if you’re already a trader or investor who is evaluating what to do next, be sure to examine your operating timeframe. If you have long-term ideas based on company-specific data, your investment timeframe should allow your fundamental ideas to prove themselves. On the other hand, if you’re looking to compound your money quickly and eliminate as much risk as possible, then a swing trading strategy may be better for you. The most important thing is to know your timeframe before you put cash to work, because only then will you be able to fairly evaluate if your stock should be kept or sold.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
5 Expensive Words
April 12, 2006 at 10:51 am
Rarely do they pay off, and yet we’ve all said those 5 costly words……
“just a little more room.”
Whether it’s been on the winning side of trades where I’ve tried to squeeze the last $0.50 out of a stock, or it’s a losing position that has been trying to tell me I’m wrong (those numbers are RED for a reason!), I am guilty!
Oddly enough, as cheap as it is to enter trades with commission structures so affordable, have you ever noticed just how expensive it can be to stay in a trade?
We all know the rules….
• Obey thy stop!
• Never Believe in your stock!
• Don’t let a trade become an investment!
…..yet it is so easy to break them. It’s a solitary job, and the only person to prevent you from compounding your mistakes is the one you see in the mirror.
So, be your own ally. Have a trading plan in place before you login to your account. Do your homework. Set hard stops as soon as your orders are filled, and let those safety nets keep your losses small (we all know how easy it is to blow a mental stop).
Be smart! Trading is about real money, not just flickering numbers on a screen. Be prepared and protect your capital at all costs. That guy in the mirror will hold you accountable the next time you see him!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
