If you're actively trading, one of the best things you can do is to treat each trading day as a blank slate.
Act as if you just joined the market, unburdened by what has been (IYKYK).
"What is the market telling me today?"
That's much more productive than opening up TradingView and immediately torturing yourself with hindsight bias.
"I can't believe I fumbled A."
"If I held X I would have Y."
"Why didn't I long X?"
Don't be a prisoner of the past.
Every day is brimming with volatility, so focus on aligning yourself with the present, not dwelling on the past that you can't control.
To heck with watching intraday swings!
I focus on following the process.. The results will take care of itself...
Watching the account value and my positions jump up and down only creates unnessesary emotions...
Staring at my positions won't make them go up anyway...
A trade is only a good risk to reward bet...
A casino would never care about watching the next card at the black jack table to see what turns up or where the ball at the Roulette table lands.... all they care about is the net result over time....
I do my trades, put in stops, put in limits to take partial profits, put in alerts.... and then I walk away from the screens...
Managing emotions is key!
This is an important message that everyone with a big dream needs to hear, because we all have periods when we lose confidence and question our purpose, our mission... our why. If that's sounds like you... read this. If not, read it anyway so it doesn't become you.
When going for a big goal, some people will try to discourage you. Even the people closest to you could be the poorest sources of advice and encouragement. Why? Because they care about you, and they want to protect you from disappointment. So they'll say things like “play it safe... why take the risk?" It’s all well meaning, but if you take that kind of advice, you’ll never do anything really great.
Only you see your dream and have the vision of where you want to be and who you want to become. Stay true to that vision and stay on course!
It ain't always easy, negative thinking can be seductive, because quitting is easy. Don't let the doubters and the critics drag you down... keep climbing! Embrace the journey and everything that comes with it - good and bad - as the necessary experiences, teachers and lessons that will give you the knowledge needed to get you to your goal.
In the meantime, live your life with integrity and kindness as your first priority. Most of all, never give up!! Unconditionally persist and you will figure it out.
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Qullamaggie: “My win rate last year (2020), and I had insane returns, was only 35%. The year before that in 2019 it was only 25%. You have to get used to getting stopped out a lot. Many times the same day and many times within a few minutes. That’s the name of the game.”
People are constantly seeking ways to be “right” and avoid the pain of losing. If you’re trading breakouts, that mindset will do little more than frustrate you and cause doubt. If you chose to trade breakouts you have to understand the odds and the nature of breakout moves.
Most of your trades will be losses. No matter how good your setup looks. Do you think KK lacks analytics and rigor before buying? Absolutely not. He trades what he thinks are the best setups available, and he still has an awful win rate.
He makes money from “winner discovery” and managing them properly, while using proper risk management to reduce damage from the many losers. This is the opposite of what most do, looking for “winner certainty”.
He expects to be wrong a lot and plans for that. Losing traders expect to be right and are disappointed how often they are wrong. That mindset shift is hard to make, but it’s vital for appropriate probability based trading.
I ran a poll recently that asked "How many years have you been trading?" The results: 82% said they have less than 10 years experience, 66% less than 5 years, and 30% less than 2. To put that into perspective, I overlaid the time frames on a chart of the Dow. The chart goes back to the day I started trading 40-years ago.
Last week, someone posted a comment to me that said "Anyone that lived through last 3 years is now seasoned." I think looking at the chart of what that "seasoned" experience encompassed, it's obvious that's a ludicrous statement. Most traders have barely lived through a bear market. The Covid decline was short-lived and recovered quickly in a V fashion. That's why this "garden variety" bear seems so long and treacherous to the inexperienced. It's not!
Be patient with the market, and most of all, be patient with yourself. Give yourself time to develop skill. If you have been trading for 2, 5 or even 10 years, you have limited experience. Keep trading and keep learning, and never give up!
During a bear market, you often get a "shakeout" in some form on the right side of a base during the bottoming process. The "reason" is usually attributed to some scary news item that fuels negative sentiment and leans on investors that have already been beaten up and worn out emotionally as well as financially. This leads to the final selling and marks the shift from weak hands to strong hands, creating the conditions necessary for a new uptrend. Debt ceiling issues, inflation worries, recession speculation and Fed language are all plausible scapegoats.
But as we look back at history and as I reflect on the nine bear markets I have lived through personally, it was always during these "scary" times that bottoms were formed and a great opportunity was about to be born.
The question is, going forward... what part of the historic narrative are you going to choose to be part of? Will you be a victim of your own idiosyncrasies and blame the market and the system/ Will you throw in the towel at the wrong time and flush all your hard work down the toilet due to impatience? Or will you be among the rare participants that remain disciplined, sticks to the rules, and as a result, defy the odds?
The way I cut through the noise and navigate these tumultuous times ensuring that I do not fall victim to my own emotions, is not by having a crystal ball or even through my experience and skill. It's by focusing on the individual stocks and sticking to sound buying and selling principles. It's through having and trusting rules.
In 40-years, my rules-based bottoms up or "stocks have the final say" approach has not let me down. My opinion and my emotions take a back seat to verdict of the market. I expose my capital to the best and plan for the worst. i only get aggressive when my trades are working, and I always cut back and trade small when they are not. In doing so, I create asymmetric leverage and beat the market time and time again. Meanwhile, the undisciplined, the skeptics and the quitters spectate in disbelief and wonder... how did he do it? He must have gotten lucky!
My response. After four decades, trading through nine bull markets and nine bear markets (including four of the worst bear markets and crashes in stock market history) and hundreds of thousands of stock trades, I would guess that I would have to be the luckiest guy in the world.
Or maybe (just a thought) discipline, strategy, hard work and commitment actually pays off, and the market is not completely random? Maybe this craft of stock trading is not just a hobby or a sport (at least for some of us). Maybe trading and investing is actually a business. And like any other business, there are principles that allow for a successful enterprise.
I can assure you it's the later, and I can also assure you that you have the potential to match and even exceed my own success. The future will be filled with opportunity. But I can also assure that you will have to dig deep and muster up the courage to think and act like a champion. Because greatness is not handed out like candy on Halloween. To the contrary, it's reserved for those that deserve it, and your worthiness will be tested over and over again.
Knowledge and opportunity does not automatically lead to success; it's what you do with the knowledge and how you handle opportunity when it comes knocking.
Step one: Stop worrying. Stop complaining. Stop making excuses. Stop believing the clowns that never experienced huge success. Follow and emulate proven individuals and proven methods. Put your head down and do the work. Be patient. Remain disciplined and your future will be bright enough to light the way for those who choose to travel in your footsteps.
Successful trading has nothing to do with getting the high or the low... it's about making more than you risk and doing it over and over enough times to reach your goal. As a trader, you should remind yourself this EVERY day!