Thoughts: As I sit here once again pondering this years market, monitor's glow washing the white walls of this room in its pale blue cast, I can't help but think that despite this years successes, next year has so much more to offer. But as a trader does it really, or do we make our own successes regardless of market sentiment.
I keep a small trading log and issues to watch log to reflect on past performance, market conditions, and particular noteworthy events. I now realize from looking at this years peformance, that I tend to reap when the market sags and the bears are running. During market period of strength, my numbers are not as stellar.
This past year has taught me that we, as traders, are opportunists and thrive when doubt, indecision, and ill-sentiment abound. For these are the periods when typical overreaction rule the day, and every investor goes against what he/she is taught, not to time the market or sell into weakness. And think again, logically, about the differences in issues during strong periods vs. weak periods. During strong periods, we see a broad rise but for the most part, it becomes a market of stocks....and a market of laggards waiting for their day. In a weak market, it seems as though all sectors flounder except for a minority few and those in the lime light take brunt of the blow. We, again as traders, are where the action is and during periods of extreme weakness, the bottom is nearly always followed by a broad based rally whereby one can make money in the hot sector of the day nearly without fail. Conversely in a strong market, one must still pick and choose with extreme care.
Where does this leave us for 1999? Realistically in the same position that we have been for the duration of our trading career or hobby, regardless of individual length. I mention often the importance of discipline in your trades and that capital appreciation is no less important than capital preservation, please remember these words more than anything else I say ..... as I now feel that these are the most important of most of my rules.
Face it, fear and greed control this market and how each of us operate as traders. For many of you, the hunt for the big kill will result in a sideline position with 4-5 "trades" that now have become long term investments. You have taken what began as a trading account and turned it into a portfolio of "hopes and dreams". We all do it, but to different extents. How many of you does this statement describe. I began my trading career with xxx dollars. I began by trading XYZ and ABC but both turned soutch on me but I feel they are good position holds now, and cannot go much lower. You cannot bring yourself to take the 25%-50% loss and see your account balance dwindle. However, after your account has stagnated with little change over a number of days or weeks, and you now are used to the "new" balance and you find the strength to now dump the losing positions are begin again ........ only to repeat the same mistake.
These mistakes come from the one thing that you must have BEFORE you enter any trade...... a goal. Regardless of whether it is a long, intermediate, position, or day trade....you must have a goal and as important, a loss tolerance. This is the point at which you WILL sell if it reaches this point. This does not mean, if it reaches this point, I will give it another 1/4 (how many people does this describe?). CAPITAL PRESERVATION!!!.
As I posted my numbers last night, what was my goal for doing that?? To boast that I made money??? NO! To show that I am a very average "day trader", but that my discipline allows me to make money where most cannot, or will not. I am a MUCH better position trader and this has always been my bread and butter as my 50/50 ratio soars to about 85% when given 2-3 weeks per position. Honestly, I believe that next year holds more for the position trader, with a day traders mentality, rather than a pure, and only, day trader.
Do whatever it takes to gain that discipline that will allow you to preserve your capital in your losing trades and appreciate your capital on your winning trades. Whatever it takes. Accept the loss and realize that every day as 60 second * 60 Minutes * 6.5 Hours of opportunities. Get over fooling yourself into why you are holding a position and see it for what it is, then make your decision. I have held plenty of losing positions for any number of reasons, but I will NOT hold a losing position if I cannot logically see a reason to.....but use objective logic, not subjective logic.
I assure you, stocks have no history or memory of your last trade or what it did last week. You won't hear many say this, but the markets are as much Psychological as they are fundamental. This is why I do not spend hours upon hours pouring of TA charts....worthless time that could be spent determining where sentiment lies.
What will be each of your resolutions for becoming a better trader this next year. Many of you have done well, I have seen your successes, I have seen your failures, and I have seen us all learn. But what have we learned individually? And what will we do with those lessons.....lets hear them.
Many have asked me to be more active in picking position trades. Is this the general consensus? I have tried to remain neutral when sharing information so as not to lead someone into a possible losing position. Many times a position play of mine will be exited only hours later if something changes in the fundamental or psychological outlook of the issue. This is what I mean about being a position trader with day trader tendencies. Enter a position trade with a goal for the upside, but still set your downside risk tolerance....regardless of how soon into the position it may be hit. But, conversely, if your upside target is hit, perhaps you may move your downside tolerance up 1/2 way to your upside target, thus locking in your gains. I do this very often.
1999 will find me entering more position trades with day trade tendencies. I will be picking stocks with 2-3 week horizons with the goal of no less than 20% gains. These are my picks, some of which I share but usually very objectively. If many of you wish me to share these more openly, please let me know and I will do so. But please, if asked to go in this direction, do not hold me personally responsible for losing your money. This is the last thing that I want to do, most of you hopefully know me well enough by now that I am not interested in having the "responsibility" of being a stock picker for the masses. However, if we are able to make money off of each others objective research, then so be it ..... as this is why I started this thread. I guess in retrospect, I have to realize that most people visit these threads in hopes of obtaining the next "big" hit without having to do any research. I don't feel that however with most of our members here.
I am not sure where this thread will end up, but I like where we are headed. We have a very respectable group here, conscious of each others feelings, and each other's well being. It is unlike any other thread I have read anywhere, let alone SI. We are slowly developing an investment/trading community where we empower each other and succeed and fail as a group. Read the TM thread and see how now greed runs rampant where once it did not. Boastful posts, blatant baseless hyping with self-serving thoughts only. I see us someday, perhaps, growing beyond SI and onto our own forum, but only if that is where natural progression leads us .... and not a day before.
Starting Monday, we take this thread to the next level. We get serious. We start the Issue Specialists program and each specialist takes on the responsibility of reporting on that issue that which is noteworthy .... no more, no less. No information is bad information and all information will be objective. We get serious about our picks, and we take our profits and don't worry about hindsight. If our stop loss gets taken out, we don't look back unless it is to reenter. We abide by the lessons that we learned in 1998 and we do not repeat the history of losing trades. We get over ourselves and our egos. We empower one another, help one another newbie and experienced trader alike, and we WILL do well.....not on every trade, but as collective, active, traders.
Here's to a prosperous year for one and all. May 1999 find you all healthy and happy.
My best to all of you.
Jeff (Trader J)
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