Fix the Weakest Link in the Trading Chain (January 4, 2010)
The following is an excerpt from a post in response to a Member’s comments on the difficulty of trading…and how to overcome it.====================
hwyflier, like I’ve said — this isn’t that hard once you know that the weakest link in the mechanism is actually the link that you find the most value in — yourself.
I’ve said many times that women trade the best because they have a common characteristic of not liking the feeling of losing money.
Men equate losing as an affront to their manhood. The rise to the challenge and ultimately lose more. Macho!
Engineers have the toughest time of all because they’ve been trained that there is an equation to solve any problem.
(Of course, psychiatrists would tell an engineer that, while you might have a nice equation to build a bridge, the equation to map human behavior to the point of making it completely predictable has yet to be cracked.).
If you can solve your own problems and re-orient yourself to doing the right thing at the right time, rather than the wrong thing at the wrong time, you’ll find trading much easier.
Of course, the joke on all of us is that it is very, very tough to re-wire ourselves!
I remember talking with Larry Williams several years ago and he said that he’ll typically make the most money when he does the opposite of what his instincts tell him to do. He was referring to the tendency to buy because you feel like a stock is getting away from you and you wind up chasing it…and to sell when a stock has come down “way too far” and being too scared to realize that the stock is actually down at a good buy point based on prior support.
This last concept is why I advocate waiting for the sign that someone else is buying before you jump in. It allows you to define your risk and be more comfortable buying the dip.
The fact is that you can make a lot of money taking the trade that no one else wants. But there are lots of trades that no one else wants…and the skill comes in determining which is the undesirable trade to actually take.
I’ll end with this — learning to trade well is a process rather than an epiphany. In fact, it is a series of epiphanies. So if you’re sitting here reading my post and thinking that you can make the transition from regular loser to regular winner, you will be disappointed.
First learn how not to lose. After that, you can focus on winning because you’ll be trading in an environment where losing is an infrequent event.
(Note: taking the occasional small loss is a part of trading. I’m talking about the big losses that plague you all day and into the night as you kick yourself for being so dumb…again!!!)
The ability to learn from mistakes is, unfortunately, a rare trait among traders. But happily, it is that same ability to learn from mistakes that enables us to profit from chart history.
Members: Here is the link to tonight’s Market Recap, with has about 35 minutes of analysis.
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