An insert from Reminiscences of a Stock Operator:

“The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you, you hope that every day will be the last day-and you lose more than you should had you not listened to hope-to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and you get out-too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear: instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit.”

If you can incorporate this knowledge into your trading plan, success is all but guaranteed. Normally there is a learning curve involved, but what is most important is to learn from your mistakes. Print out your charts, write down when/why you entered/exited each trade and your reasons for doing so. If you strayed from your trade plan at all, write down what caused you to take premature action and try to guard yourself from making the same mistake in the future. There are only so many scenerios out there and once you’ve experienced them (sometimes more than a few times is required), it’s all about recognizing them when you’re in the moment and taking the proper action to stay focused.

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