Morning Market Thoughts

Good morning. First, a market comment. Apple (AAPL) is up. Stocks go up….at least that’s what it looks like at 8 am ET.

Now, some thoughts about your trading game.

One of the essential ingredients for consistent, profitable trading is the desire to trade. That sounds simple enough. Everyone who trades does it because they want to. It’s not indentured servitude. We trade because we like the idea of making money through the fruits of our own labor. It feels good to make a winning trade. Posting losing trades doesn’t feel good, and we resolve to do better next time.

But for a lot of folks, trading is like golf.

If you’re an occasional golfer, you don’t think much about the game until you hit the course. You show up early, hit a bucket of balls, and then head to the course in search of greatness. But it always goes the same way. You don’t like getting sand in your shoes. So you walk lightly as you step onto the beach to hit your ball about 10 feet in front of you. The only good thing is that you don’t have to switch clubs. You can use your well-worn sand wedge again. Ultimately, you rake the sand and move on to your usual three put. Another double bogey — and it was a par 3.

You’re happy that you brought a lot of balls because you refuse to bring a mask and snorkel to find the balls you hit into the pond….while thinking about not hitting it into the pond. You didn’t bring a compass to find your way out of the woods after you get lost trying to find the ball you hit while thinking about…not hitting it into the woods.

But every once in a while, you smack one right down the center of the fairway. Suddenly, all the frustration is forgotten and you remember why you play the game. It’s fun!

Trading can be like that. Most don’t spend much time studying the art of trading. They trade on hunches. They usually lose money because they don’t know the difference between fear and greed. Why? Because they’re not particularly self-aware. They don’t think about risk management because it’s more fun to think about the money they’ll make when the stock or option they buy explodes higher. And when their trade takes a disastrous turn, they don’t know what to do. Why? Because they weren’t thinking about Plan B.

If you’re the occasional golfer, then face facts. You’re probably not much better than you were last year…or even 5 years ago. You repeat the same mistakes. If you’re the occasional trader, then you are probably not much better either. You repeat the same mistakes. But just as you like to golf, you like to trade. That sweet feeling you get when things go your way is addictive…just addictive enough to make you come back for more.

When I was in my early 20’s, I worked as a page at CBS. One of the shows I worked on was the Mike Douglas show. I remember one show in particular. There was a little kid with a putter who was apparently a good golfer.

His name was Tiger.

A while later I left CBS to work as a production assistant for Three’s Company. After that, I returned to school and got my degree in physical therapy. Then I went into the real estate business. After that I went to law school. And after doing that for a few years, I discovered trading. And I’ve been doing it ever since. And while I was switching jobs all the time, what do you think Tiger was doing? He was playing golf every day. He took instruction and always had a coach who helped him work on his game.

Tiger didn’t just like golf. And he didn’t just have a desire to play. He had a BURNING desire to become the best. Ultimately, he succeeded.

I’m not suggesting that you need to focus on trading every single day if you are to become successful. You don’t have to dedicate your life to trading. But you need a burning desire to get to where you want to go. Do the work. Put in the time. Be consistent in your position size, start small, demand entries close to support rather than right under resistance because you “know” the stock is going to break out “this time.” Don’t expect the unexpected when it comes to stock. Expect the expected, and and reap the reward.

If you do that, I promise that you’ll hit more trades (and balls) down the middle of the fairway.

Have a good day…and keep your head down.

–Dan

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