Let's Revisit Our Basic Rules
Hopefully You've Added A Few Of Your Own
Welcome to summer and perhaps a holiday week where the best thing for you to do is find somewhere else to be. For me, it’s a great week to review just a few of the topics I have broadcast over time. One of those areas encompasses the “rules”.
Now, before you get excited, rules are not perfect. Nothing is but following what we do offer is a great place to start. Remember, I’m a long-term position investor / trader and I depend heavily on hedging. I’d much rather be right than wrong but in reality, I would prefer to be safe than sorry.
I’m not one to select investments based on going to the moon or zero. That’s not my style. If it is yours you are in the wrong place. Learning how to trade and invest is not a sprint, it’s a marathon. If you think you can “learn” the “right way” in a short period again, you are in the wrong place. Thanks for visiting but it’s important that you know from the start what to expect. With that in mind, let’s review a couple of what we call our “commandments” just like Mel Brooks did in “History of the World Part I”.
Rules to Abide With
Over the years, I learned a great deal from others. That is what I’m trying to give back to you all through The Ticker. Here are a couple of rules I’ve learned and used over the years, many of which were instilled in me early in life. They still work pretty well.
Don’t trade when the words “hope”, “pray”, “wish” or even “think” are associated. There will be plenty more opportunities to make money. As a position investor and trader, I don’t act unless the signals I use align and the probability of success approaches certainty. It works, give it a try.
Make a solid plan and learn the basics of investing and trading before you start. Unless you want to fall into the category of just being “lucky”, it doesn’t last, or blowing yourself out of the “water” more quickly than not, you are best to begin investing or trading using a “paper” account.
Follow your plan. Think about it; you’ll be making your first plan. I hope you’re not just doing that for fun. You are creating your plan for you; use it. If you are putting it together as a necessary exercise do something else. Investing or trading is an important, life-changing decision so in short, don’t screw it up.
Choose a trading style. I’m a “position” trader but I’ll always jump on a solid day, swing, or scalp trade. Choosing a solid trading style helps you build your plan; it doesn’t preclude you from trading other styles. Understand your ‘risk and reward” status, and what you can afford to lose before taking chances.
Do not overtrade. I don’t trade much. In a prior lifetime, I traded a lot more. As I have aged the “reflexes” are not there anymore, and neither is the interest. Trade within your boundaries; wait for opportunities to arise, those that you plan for, the ones that find you versus just shooting “buckshot”.
Cut your losses short. There will be more “opportunities”. Just how many times have I said this? I’m not doing it for my health; abide by this rule. You’ll hear it from me over and over again so listen, it works.
Let your profits run but “remember” greed kills; bulls make money, bears make money, and pigs get slaughtered. People too often look for the “big one”; not me. I’ll take a piece out of transactions knowing I can always identify the next one. Remember, you’ll never go broke taking a profit.
Do not stay too long in a good trade. This is for all you day traders. You are short-term by design. Your plan dictates a desire like the hamburger chain, “In & Out”. Follow your plan; if it’s not working reevaluate it and reassess what type of trader or investor you are especially if you’re not profitable.
Recognize fear, greed, ignorance, stupidity, and impatience; take advantage of them. Assess the overall market direction then watch for aberrations; the moves that are contrary to the overall direction markets should trend. Take advantage of the opportunities other traders offer on a “silver platter”.
Not having a position is a position. The best way to teach this is by adding a third moniker to the list of positions I use, “long”, “short” and “flat”. Being out of the market is a position. It’s the position I use most often.
Gamblers and thrill seekers lose. I play Roulette. Like a casino, if you do not have a game plan, you’re just gambling. Clearinghouses make money every time you enter a trade. Don’t make them a winner.
Don’t trade on rumors. If you receive insider information how many people before you have already heard and acted on that news? You were not the beneficiary of the news. You’re more than likely just a victim of a ‘pump & dump’ scheme where true beneficiaries of the news have already cashed out.
Learn from your losses, learn from your mistakes. Do not define the word “idiot” in its primary form by doing the same thing over-and-over again just expecting a different result. People learn more from losers than from winners.
Always use stop losses. Let me repeat; always use stop losses. Let me emphasize; ALWAYS USE STOP LOSSES. This world changes on a dime.
While this might not be a critical week for you market-wise, it should always be one where you can learn something from someone else. I do it every day and you should too. Learning is fundamental. Being informed is important but knowing where and how to look is equally important. Consider The Ticker as your guide and thank you for the opportunity to be of service.
Crosby, Stills, and Nash were my all-time favorites. I probably saw them perform live more than twenty times. ELO and James Taylor were close seconds. Without a doubt, I learned something about myself every time I listened to the words from their songs. “Cathedral” sticks in my mind as I can relate to the lyrics. When I visited England I had the chance to visit Winchester Cathedral. It was mystical. As I did in France just being there was a revelation. Have you ever had such an experience? If you have then just cherish it, appreciate it for what it is worth.