Wednesday, September 27, 2006

The Journey of a Thousand Miles

Today was a good day for me. First off, I protected my profits in IAAC. Nailed the exit almost at the top, couldn't have timed it any better than that. Having nailed a victory like IAAC today gives me hope that I can cut down on my other mistakes. I'm sure it's been there before, but lately I've started noticing that I have pre-conceived subconscious notions about which position to sell, and which position to hold onto. This probably explains why I haven't been obeying every one of my stops every time. Perhaps once an alert goes off, I should just dump it instead of looking at the chart. I mean, the whole point of using an alert instead of exposing a hard stop for all to see was to avoid getting whipsawed out of a position, like what happened to XMSR today:

Without a doubt this is a cruel and twisted game that is being played here. An ounce of prevention is worth a pound of cure, so in this case, I would avoid playing XMSR altogether - since now that it's proven it's more than capable of taking out your stops before heading higher, why expose yourself to that kind of whipsaw? There are plenty of other fish in calmer, more well behaved waters to choose from.
Still not sure about when to use alerts, and when to place hard stops (other than the 5minute rule). This is probably one of those case where intuition plays a factor in the criteria.
Even though I did well today, I still have so much to improve upon. The first one would be wiping out my pre-conceived notions. Stops are there for a reason, and I need to stick to them like moths to a light bulb. Another area to improve upon is to practice patience. Waiting for the market to tell you what it is doing, that is so important that it basically defines the difference between success and failure. Van Tharp said successful trading is 60% self-control. Well, to extend that thought a bit further, I would characterize successful trading as:

20% market/sector/chart analysis
20% risk analysis / money management
20% Patience (this is part regarding the waiting for the market to tell you what it is doing)
20% Emotional control (emotionally detachment and objectivity about your trade)
20% Discipline (acceptance, hard work, working hard, persistence and willpower)

I haven't even begun to address emotional control and discipline, I'm still working on the money management and Patience part - but it's a first step, and I remain committed to the goal of becoming a successful trader.

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