Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: rjm2 who wrote (1349)	3/31/2001 11:43:34 PM
From: Apakhabar	Read Replies (2) \| Respond to of 1426

rjm2, There are rules that must be followed, but as in anything competitive, they are regularly (which is not to imply often if you think in terms of percentages) broken. Cheating is a fact of life in almost every competitive pursuit. But so what? If you really think that it's so pervasive that it stacks the odds of trading successfully against you, then don't trade. Or if you think it makes you psychologically unable to accept responsibility for bad trades, then don't trade. Your mind is your greatest capital. Any single trade can be affected by luck but in the long run, success in trading depends on your own mind. You've got to know deep down that the people who are trading on inside information are not going to have any material effect on your success. Dwelling on the illegal activities of some market participants will never help you. And while I believe that many rules get broken many times every day, the odds of such activity affecting a stock that you have a position in are very, very slim. And it's just as likely to help you than hurt you when it does. Furthermore, the main reason technical analysis exists is for you benefit or not be harmed from someone acting on inside information, or insider knowledge. Finally, let me give you an example of a trade that hurt me. In February 2000, I was holding a long position in a small cap stock whose CEO had announced a month earlier was on track for a record 4th quarter and was looking forward to record profits for the next year. This being before regulation FD, the CEO called up the four analysts who covered the stock and tipped them off that the company was not going to meet expectations in Q1 and Q2. Needless to say the stock began to tank, and I just couldn't understand why, and eventually, the next day, when the news of the shortfall was made public by one of the analysts, I finally got out for a very bad loss for me, about five thousand dollars. Without question I was hurt by the selective disclosure that reg FD now prohibits. But here's what I eventually concluded: 1. As a trader, it is NOT my job to fight the tape when a stock is going hard against me. I learned that if I don't understand why a stock is behaving as it is, then unless it is going in my favor, I must get out of the position and just watch. I'd say the selective disclosure really only cost me about $600 and the rest of the loss was due to me not following acceptable trading rules. 2. I missed a great opportunity to go short because I had a bias about what the stock was worth. As a trader, the intrinsic worth of a stock is not relevant. "Worth" in that regard is the concern of investors. Had I been thinking like a trader instead of an investor I would have made back that $600, and made significant profits to boot. 3. The reasons why a stock goes against me are not important. What is important is the reason why at a certain price I took the position, the reason why I stayed with it, and the reason why I exited when I did. In other words, all the important reasons concern me and prices, not the stock. It could be any four letters. It's price, movement, and me. 4. By remaining "pissed" at the CEO for a couple of months, I missed a countless opportunities to trade the stock successfully after the stock washed out and large numbers of investors capitulated. My own emotions blocked me from being able to look at the stock objectively. On the other hand, I was smart enough not to "revenge trade," and in fact had a good, profitable month that February and had my best months of 2000 in March and April, and part of that success I attribute to the fact that I have internalized the belief that my best trades are always in front of me, not behind me. All FWIW. Good luck to you.