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Strategies & Market Trends : NetCurrents NTCS -- Ignore unavailable to you. Want to Upgrade?

To: Lazarus_Long who wrote (6451)	3/21/2001 8:07:20 PM
From: Michael Watkins	Read Replies (1) \| Respond to of 8925

Much easier to blame some anonymous devil True enough, and for traders, not accepting responsibility for ones own actions is a sure way to blowing out an account. A related sin, apportioning blame to other people or events, seems to be a favorite subject these days: "Its the Market Makers" (this seems to be popular in bull and bear markets!) "Its the shorts!" "Its the analysts!" "Its Greenspan!" "Its the election!" A cardinal sin - so many traders and investors trade without any sort of stops, which is a fear and 'I need to be right' bias issue all rolled up into one. Mental stops do not work for many, mostly because we lack the discipline to admit when we are wrong and then take action. Is admitting sins from the past the path to good karma? Perhaps not, but I'll give it a try here in the event that some traders and investors might recognize themselves in the following experience of mine from years gone past. It all starts with a premise - "This stock or market is going [up/down]". I would enter positions with some sort of mental stop in mind where I promised myself if the position went against me, I'd close it out. Invariably, if price went against me, I'd find some rationale to justify staying in the trade. They might include: - 'oh, the next support (or resistance) level is near by' - 'oh, on a percentage basis its not gone that far. I can tolerate more pain' - 'oh, man this one when it reverses will really ramp (or clunk) so I'll double my position to make up my losses so far' [I get shivers thinking about that one!] - 'uh oh, its still going against me. stare at wall. wonder why I didn't put all my money in mutual funds. stare some more. read commentary all over the net as to why XYZ was a good thing to be long or short' - ... etc.... Price being diabolical, it would continue to go against me. More often than not I'd forget my mental stop 'promise' made before the trade, and instead I'd bump my stop a little farther away, and firm my resolve to exit the trade if price moved through there. Little did it occur to me that my thesis for picking the direction being totally wrong, price would of course continue to go against me, far more often than not. This painful and emotionally draining and demoralizing process would continue. After hitting the 'deer in headlights' phase, at some point I'd snap out of it and exit the trade, at the market no less at some horrible fill. Naturally, my fill would be almost the exact point at which price would stop going against me... inflicting both the largest possible financial loss and a big emotional stab in the heart. The moral of the story: If a new trader is actually using real capital instead of trading with paper, they'd best put stops in place - any stop is better than none at all. At least they will stem the tide of losses and improve their chances of having capital left by the time they finish their education. Once that simple commitment to sanity is made, then a trader/investor can move forward and learn technique and improve skills, and one day hopefully look back and say what the heck was I thinking!