5 DISCIPLINARY MEASURES THAT WILL MAKE YOU THE KING KONG OF TRADING OR INVESTING
Nothing has changed. I came into this week thinking that the general market averages were in an extended consolidation phase within a healthy bull market. And I think I will be exiting this week feeling the same way.
I get shocked at the number of people I see attempting to overthink the financial market on the daily basis. It's turns into such an ego game for some people. They get in the way of themselves. It's like the tennis player who attempts to think about the positioning of his feet, the rotation of his shoulders and the stiffness of his wrist while he's hitting a forehand. The mind gets in the way of innate ability. It's much the same in speculation. If you think too much, you die.
It's so easy to mentally masturbate with all of the information that is at our fingertips nowadays. You can find one million different ways to slice and dice any piece of information. I feel terrible for anybody attempting to learn about trading or investing in this environment. While the abundance of information makes things easier in some respects. That same abundance of information can prove extremely detrimental.
You can find varying opinions on every single method available for speculation. Unless you have a mentor to literally hold your hand as you walk down the house of informational horrors that the internet can become, the task of getting to that point where you are self-sufficient and confident can't be an easy road. I'm glad I came up during the time that you had to order ValueLine (came in the mail) for information on stocks and I got my real time quotes from a Quotrek with a 2 foot metal antenna that received radio signals.
There are a few methods you can use to improve your trading or investment results right away. I would advocate the following disciplinary measures:
1. Know what you are going to do tomorrow tonight. This means that you should be doing extensive homework at night for the following day. No trade or investment should come as a surprise the next day. You should have all scenarios planned for the day ahead.
2. Becoming impatient, fearful or going against your discipline means you are done for the day. If you have positions that are hurting you cut them down to the point where they no longer hurt. Being in an impatient, fearful or undisciplined state opens the door to your EDS. And when your EDS is opened you have one foot in the grave already. If you feel any of these during the trading day, have the discipline to get up, walk away and start fresh tomorrow.
3. Stop thinking so much. The financial markets are 100% counter-intuitive and counter-human. Normal human thinking that works in everyday life can destroy your capital. One example of a normal human trait is the feeling that if you aren't working hard and pressing yourself to be better then you are doomed to failure. This works if you are a sales guy or an attorney. In the markets, however, pressing when nothing there means you are overtrading, overanalyzing and overdoing a job that can be so much more simple than you make it. Learn to shut your mind off and pay attention to the things you need to pay attention to. This is more easily achieved by following rule #1 strictly.
4. What the other guy is doing makes no difference to you. I know guys who have become extremely successful trading/investing that use nothing but fundamentals. I know guys who use simple breakout systems and have done very well for themselves. I know guys who use sophisticated quantitative methods that have back tested ad infinitum and are doing great. I also know guys who have failed using every single one of the methods described above. The difference between the guys who used the system and succeeded versus those who failed using the very same system is that the successful ones made sure the system suited them personally. Find what works for you and stick to it. Your personality and demeanor must match your method of investing or you have failed before you even begin.
5. Go through 200 charts per night, every single night. That's at a minimum. I was going through 500 or more per night for many years. I do about 200 per night now. Not because I believe that technical analysis is the be all and end all in trading because it's not. However, going through charts every single night, day in and day out, helps you develop an understanding for price action and volume that become ingrained within you through time. It will make you a better trader or investor just as shooting 500 free throws a day brings an NBA players free throw percentage up. Or hitting 500 serves per day in tennis brings your first serve percentage up. Keep the charts simple. No need for any silly indicators. Get to know the relationship between price action and volume. You will have that much more of an edge.
Hope these 5 tips help. If I can think of more I'll write a followup.
