Hi Reid and all,
Lately, I've received numerous PM's asking me about trading philosophies and strategies. Many people have witnessed big losses in their accounts, and are thinking the big money is being made by the traders getting in on those swings. But don't kid yourself, many traders are losing money too. At this point in the markets downtrend, the trading can be fast and treacherous, and I wouldn't recommend it to anyone but the most seasoned traders. If you haven't been a very active trader or your trading strategy is failing, I recommend the following:
The first, and most important thing, is to trade without emotion. It detracts from all logical and necessary decisions. If you feel emotional, don't trade that day. Back off, recognize where you coming from, and also recognize that the chances are that you won't make a successful entry and exit.
In my own trading pursuits, I make mistakes all the time. The reason I wind up ahead is that I very quickly cut losses, and get out of a trade that didn't go the way I expected it to. The good trades outperform the losses if one doesn't allow losses to mount.
Next, define what your best strength in trading is, and work on getting better and better at it. Everyone has different strengths. That's why it's so important not to make a trade just because someone else is doing it or suggesting it.
In addition, the ability to be honest with yourself and unemotionally recognize your weaknesses is just as important. A trader really needs to quickly understand why the trades aren't working, and not be attached to being "right." (This process isn't easy, and will involve some candid soul searching).
I would suggest backing away from trading for awhile until you can answer to your own satisfaction your strengths and weaknesses, and then systematically develop your own trading strategy. One cannot trade well unless their strategy suits their personality, and more importantly, keeps emotion out of the trading picture.
Here's a good post from the IntelligentSpeculator to read:
Message 14679341
Vendit put some wonderful links and tools in his thread header that are well worth taking the time to study and understand:
Subject 27793
A subscription to Investor's Business Daily is great for keeping your market knowledge up to speed.
Finally, if you've been mostly an investor, and are thinking you've missed the boat while some others are "cleaning up" by trading, and you want to make some of your losses back, recognize that you are coming from an emotional place. If investing is your style, stick to it - just work at getting better at it. Remember to always cut losses at no more than 8%, and NEVER let a gain turn into a loss. Investors have a good opportunity coming up. Once the market finds a bottom, you can choose a few very good stocks you'd like to buy and hold that offer good entry points.
The key here is, let the market find a bottom. Nobody really knows what that is yet - not the pundits, not the best traders, no one.
That's about all I can say. LOL!, since I've really gone on here. But as I said, I've received numerous PM's and wanted to address this for lurqers on the thread that are having similar concerns.
This will definitely go down as my longest post to date!
Donna |
