Stock market trading - Trading commentary

Trading Commentary — A day late, a dollar short


Trading Commentary — A day late, a dollar short

The comments herein are not applicable to all traders. But to those for whom they are applicable, you will know it.

Four part question:

1    Have you ever had a strong feeling that a  market was about to do a certain thing? As an example, let’s say you had a strong feeling the S&Ps were about to rally 30 big points.

2    Next, have you ever then jumped into the market AFTER it started doing what you expected it to do? As an example, let’s say you bought the S&Ps after it rallied 20 points.

3    Next, have you ever then been spooked out of the trade you chased on the first adverse reaction against your position. Going back to our example, you chased a 20 point rally in the S&Ps, then got shaken out on a 10 point reaction.

4    Next, have you ever then watched the market complete the move you expected without having a position?

In the example above, you expected the S&Ps to rally 30 points — the S&Ps rallied 30 points, but you lost 10 points in the process.

This is where trading regret comes into the formula. This is where one mistake can beget the next mistake.

So, what is the solution? I offer one of two suggestions.

First, you learn to pull the trigger when you should. Most traders with two or more years of experience know what they need to do to be successful. The problem is doing it.

Second, if you do not take a trade when you should take it, you MUST learn to stay on the sidelines. There will always be another trade.

If the above four-part scenario represents a  cycle you are caught in, you will NOT make it as a trader. Fear is a trader’s enemy.

  • You fear your market instincts or trading rules may be wrong, so you do not pull the trigger when it should be pulled.
  • You fear you are missing a move you predicted, so you jump in a day late.
  • You worry you entered the market too late, so you get shaken out on the first adverse reaction.

Trading success has little to finding a better mousetrap to predict price movement. Trading success has little to do with obtaining better trading technology.

Trading success is a battle fought in one’s head and gut. Trading success is a matter of overcoming self. A trader is his or her own worst enemy. You have met the enemy — it is you. I have met the enemy — it is me.

Once you have enough experience trading, you know full well when you do something stupid. You know when you are making a mistake at the time you are making the mistake.