In the past my biggest fault as a trader was trading too often. As Tom Petty said "The Waiting is the Hardest Part". To sit on your hands and do nothing makes most traders very uncomfortable. They always want to have a stake in the game. There seems to be a psychological and social pressure on Traders to always do something when they are "working". In our society we are conditioned from a very young age to value a hard days work. Not working leaves many people feeling guilty. If a Trader is harboring such feelings within himself he will have a very difficult time deciding when to be in the market and when to be out. In addition to being in the market when he should not be, and taking risks where he does not have an edge, he will often have difficulty exiting the market when he should.
The great stock speculator Jesse Livermore said "even after you develop an opinion on the direction of the market, wait until the market action itself confirms your opinion before backing your commitment with your money". To sit on your hands and wait around for the market is the most important trait of a good trader, and the most difficult to develop. Unfortunately this skill is usually not present in Traders until they have lost much of their capital in the markets, and have witnessed first hand the devastating effects of Over Trading.
Wednesday, June 25, 2008
Monday, June 23, 2008
Taking the Money and Running
Taking the Money and running is sometimes the best course of action. When you see signs the market is turning do not delay and wait to take your profits. Book them when you have them. Then reevaluate the market. Not having skin in the game will keep you more objective.
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