Sunday, September 7, 2008

Rule #1 Make Up Your Own Mind

I am actively constructing a set of rules to make my personal trading better. I will be sharing these rules over the next few days.

Make up your own mind!! Do your in depth research or don't take a position. I can't count the times in my early trading days that I heard some trader/investor or talking head mention a stock (and make it sound like it was almost can't miss) and made a quick decision to buy it. You then go through all of the emotional excuse making and always find a way to blame someone else. Far too little is made of how important emotions are to being successful in this business. I guarantee that emotions are a huge part of this game. The great thing about the market is that you do control your own destiny. You are in complete control and all the decisions are yours to make. Don't try to take shortcuts by listening to the "hot tip" it simply doesn't work.

If you do your own research, you will understand why you believe that this position is worthy of your capital. It sounds silly, but WHY is a huge question that you need to answer for many reasons. Most importantly, it will give you the ability to analyze your trade and refine your style. While analyzing a loser may not be the most fun thing, it is important. Analyzing winners is important also. There have been times that I made money on a trade and upon further review found out that my analysis was flawed and I was just lucky.

Doing your own research also enables you to differentiate yourself from the masses. If you are following a tip from an investor or mainstream media pundit, you may be headed down fools hill. To be successful over time, you have to be different. If you really study like you should before taking a position---you should also eliminate the "gotta be in the game" mentality. I have been the worlds worst about having to make a trade if the market is open. The best traders are waiting to make the right trade at the right time----so if you are just trying to force a trade you are most certain to get eaten by the sharks. I should know---I have done it over and over again.

Win or lose, you have only to look into the mirror to find the responsible party. STUDY HARD---REVIEW YOUR TRADES.


Dollar.Discipline said...

The problem becomes that the market at times is irrational and even the best research (and even perfectly correct research) doesn't always translate to made money.

Long term position should translate to 5 years or more. Not a few weeks.

Anonymous said...

dollar discipline---5 years with this kind of volatility is an eternity. you must be reading a warren buffet book.

of course i would want more than five years if OBAMA wins because he is gonna tank the market for 4 or more if he gets in.

Dollar.Discipline said...

We'd all do well to read a Warren Buffet book. Things have panned out for him.