Are You Too Motivated to Make Money?
June 7, 2010 at 1:38 pm
I know you aren’t lazy. The fact that you’re reading this tells me you care enough about your trading to hunt for clues that will make you better. You’re motivated.
Many of us think of ourselves as hard workers. Lazy gets us nowhere.
The problem is that when it comes to trading, motivation doesn’t always translate into greater profits. Incorrectly applied, motivation in trading can actually bring on some serious heartache.
The ‘O’ Word
It’s definitely true that the timeframe you trade should match your personality. Those who are patient can take longer timeframes while waiting for larger moves to develop. Those who are less patient will tend to find that the shorter timeframes suit their needs for knowing if they’re right or wrong.
But…that’s not what I’m referring to.
Regardless of your preferred timeframe, the fact is that you can still overtrade. Whether your average number of transactions per week is 100 or 3, there will still be a point at which you should be done. Perhaps the move of the day has already happened, and you’ve got a sense of that, but you keep pushing buttons in an attempt to make something happen. Maybe your P&L is flat, and you hate the idea of fighting to a draw. So, you lower your standards and take some trades in hopes of either making some money or losing some. Hey, at least you’ll have something to show for your time, right?
Or consider another scenario in which you’ve turned a quick profit, whether through an overnight position that gaps in your favor, or simply some quick trades early in the session which put you nicely positive on the day.
If it were 90 minutes to the closing bell, you’d probably shut it down, but it’s only an hour into the session and you’ve got no idea what to do with your day if you quit now. So…you stay and trade and give some or all of it back.
You hate yourself an hour or two later, wondering why you didn’t just ring the register on the early profits and call it a day. In hindsight, up a little is much better than flat or down. But your greed and your ‘motivation’ really cost you.
Sound familiar? It is to me. I’ve been there way too many times, so these are mistakes I’m all too familiar with.
The Real Meaning of Lazy
For me, it really stems from the (incorrect) notion that not trading = lazy. That’s dead wrong, but periodically I’ll operate under that mindset and later on wish I hadn’t. I’ve never been a lazy person, because there’s always something to do. I like the feeling of getting things done. And when the market’s open, I know what my job is – to trade. Or so I tell myself.
In reality, my job as a trader is to put money at risk when there’s an expected payout of greater proportion. That should translate into profits.
My job isn’t to continually churn my account, try to grab every stock on the move, or to hit a daily volume target. I need to feed the family, pay bills, and build my wealth through my trading. That’s it. Pretty simple, but easy to forget when quick gains come along or when I battle several hours and make no progress.
Oddly enough, being lazy as a trader involves sitting at your desk when you should be doing something else. It’s hard to get up and walk away when that ticker’s still on the move. The allure of ‘what if’ drives too many to stay right there in their seat for just a little longer, and it’s costly.
3 Tips to Stay On Track
There are several ways to stay on track with your trading, so let’s take a look at a few of them.
1. Remember your goal. This seems obvious, but a regular reminder of what you’re striving to achieve through your trading will be a tremendous help to you. Maybe you keep a photo of your family close by as a reminder that you can’t afford big down days, and it helps you walk away when you aren’t seeing the tape clearly. Or maybe you keep a picture of that boat you want to buy close to your screens, helping you to focus your efforts on only the cleanest chart patterns so you can reach that goal sooner.
It’s a fine line to walk between fixating on something that’s actually a distraction, versus keeping a reminder in front of yourself to maintain the proper mindset. However, if you’re keeping yourself reminded of what it is you’re after, you won’t leave yourself much room to stray from the route you’ve laid out to get there.
2. Define your job. The word ‘trader’ might suffice when you’re telling someone else your occupation, but when it comes to the daily tasks you set out to accomplish in your trading, some boundaries should be defined. With greater experience comes greater clarity, so this will be easier for those of you who have been in the game a while. Nonetheless, it’s important to outline for yourself which kinds of market conditions you’ll be active in and which conditions will warrant standing aside.
Outside the realm of market conditions, you also should have some general guidelines for your P&L on any given day, week, or month (depending on your trading timeframe). For example, as a day trader, perhaps you structure a typical max-loss amount which will mean no more trades. That might be $500 per day for some, or $5000 per day for others. But having it in place will serve as a system breaker and avoid overtrading when you’re clearly out of sync.
You can also designate a general target for gains, that when it’s reached, you’re then committed to retaining a certain amount of those gains. Suppose once you’re up $1000 on the day, you’ll commit to keeping $500 of it, no matter what. You can keep trading and add to it (if the right setups come along), but you’re going to book an up day regardless. These things will help to protect not only your capital, but your confidence as well.
3. Have something else to turn to. Simply put, if you’ve got a go-to list of things to tend to always at the ready, then you’ll have that much more reason to shut down your trading once you’ve hit your loss limit or booked nice gains on the day. Rather than falling into the trap of sitting at the PC and pushing more buttons out of boredom, you’ll always have something to move on to when the time comes. That might mean you run some errands, get organized, go for a bike ride, or grab a book. It’s not so important what it is, so much as you have another activity to turn to when you recognize you shouldn’t be trading. Have that ‘thing’ in place at all times, and you’ll avoid overtrading.
In summary, dirt-cheap commissions and sophisticated trading platforms with all kinds of bells and whistles are really great to have, but remember one thing…they only exist to help you do your job. Don’t use them as reasons to be active when you should be sidelined. Know your objective for the current conditions, for the next trade you take, and for the reason you’re trading to begin with – and be not distracted.
Trade Like a Bandit!
Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com
Are you following me on Twitter yet?
Video Review of the Indexes 6-6-2010
June 6, 2010 at 11:33 am
For an abbreviated trading week, last week’s market action held nothing back. It was the opening and closing weakness which made the net difference, but there was plenty of action in between.
Friday’s selloff took the major averages to key support zones which will be the focal point heading into Monday’s session. If those areas are able to hold, then the bulls might gain some needed confidence. If not, all bets are off for this market which has shown a persistently negative reaction to any bounces.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 5-31-2010
May 29, 2010 at 7:04 pm
The indexes tacked on some minor gains last week, but the bulls really had to earn it. Prices finished at their extremes for each session prior to Friday. Gaps were both filled and created, and rallies and selloffs characterized the day to day action.
Some support is becoming evident on a closing basis, although the buyers still have a long way to go before this market can be considered out of the woods. Right now the environment is really touch-and-go, and commitment to a direction has been coming in increments of just a few hours at a time.
That means it’s a trader’s market, but it’s really favoring those with intraday timeframes at the moment.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Selective Memory
May 26, 2010 at 10:40 am
Trading is one of those things that really requires a selective memory.
The same kind of selective memory that I needed when I was on the dating scene. I chose to ignore the bad experiences I’d had with certain girls, and I stayed in the game long enough to find the wife of my dreams.
It’s the same kind of selective memory needed on the golf course. That bad shot from a few holes ago needs to be suppressed for this next one across the water hazard. Otherwise, you’re toast.
Some traders never develop this skill, unfortunately. They cling to the past, unwilling and unable to let it go for the sake of making that next trade. Getting faked out of a good trade last week prevents them from taking a similar setup this week, afraid it will hurt their account once again, or worse, their ego.
They have a good memory, yes, but they’re not using it in a good way.
That’s no way to trade. Clinging to memories which don’t empower you is a form of recency bias, and it can really prove costly in this game.
The Petrified Don’t Profit
Take last week, for example. The downdraft in the market left many trying to step in and get long near what they thought was the low of the dip. They were early on Wednesday and Thursday. Those who threw in the towel never took a swing at it on Friday, which provided the best rally of the week with the morning gap fill and continued climb into positive territory.
Sound familiar to you? Is this starting to ring a bell?
In a recent conversation with my friend Charles Kirk, he was telling me about some newer traders he had been working with. His delight came not only from helping them discover more about trading, but also from their attitudes in taking trades during difficult market conditions. He mentioned how the newer traders see a setup and just go for it, rather than hesitate the way some experienced traders do who are dealing with recency bias.
Love is a Choice
Love is commonly described as a feeling, but true love is really a choice. It’s a commitment to look beyond one’s faults and accept the entire person. It’s a decision. Marriages which last 40, 50, or even 60 years are based on that decision, long after superficial beauty has faded.
Having a selective memory in your trading is also a decision. It takes commitment and practice to make it a routine, but it’s worth it. Expect the best from yourself, but along the way, know that you’re going to make some mistakes. There will be headfake moves which shake you out. They aren’t fun, but they don’t have to sideline you and damage your confidence forever.
Mistakes cost money, so they’re worth learning from. However, they can also cost us opportunity if we allow the memory of them to stand in the way of taking new trades which suit our plan and which offer great potential rewards.
Look for some mistakes you made this week, learn from them, and then choose to look beyond them so they don’t cost you any opportunity.
Trade Like a Bandit!
Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com
Are you following me on Twitter yet?
Video Review of the Indexes 5-23-2010
May 23, 2010 at 7:31 pm
The bulls did some suffering last week, there’s no question about it, but they were able to put together a modest rebound on Friday after an exhaustion gap to the downside. The relatively minor recovery seen from there constitutes, for now, a successful test of the May 6th lows.
But we sure don’t know yet whether those support zones will hold. After all, we just confirmed a lower high on the daily charts of the indexes, and that’s nothing to ignore. The short-term trends are down, but the stretched nature of the most recent pullback opens the door for some additional potential on the bounce, so stay tuned.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Every Day’s a Monday in Trading
May 17, 2010 at 9:06 pm
We all love a fresh start, am I right? Sometimes we just need that new beginning. Like a Monday morning diet when we’ve pigged out all weekend.
Or the opening bell after a tough stretch of trading. Both the Monday morning (for the dieter) and the opening bell (for the struggling trader) bring hope for change, so they’re quite similar. The big difference is that as a trader, we don’t have excuses to wait until next week to start taking control.
In my own personal trading, I’ve learned to make some adjustments when conditions call for it, because that’s what’s needed for different results than the frustration that only trading a single style can bring. Building your skill set takes time, but you can improve every day and experience the fresh start of a Monday whenever you want it.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 5-16-2010
May 16, 2010 at 6:59 pm
Last week we saw the indexes make some headway, but it just didn’t feel that way. What started out with a massive upside gap on Monday and additional strength into Wednesday’s close, actually ended with plenty of downside on Thursday and Friday.
On an open-to-close basis, the week was negative, but on a Friday close-to-close basis, it was an up week. That’s just how it is when emotions are running high and volatility expands. And that’s exactly the kind of market we’re in right now.
But that is a good thing, because it means stocks are on the move in both directions, offering plenty of potential for profitable trades – if you know your stuff.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
