Saturday, 2 August 2008

Scratch That Itch!

It's been quite some time for many of you since you were able to trade and made a profit. Lately it's either you bought some stock for some reason and it plunged or it's a hands off policy on the market. That trader in you has been wanting to get their hands on some issue to trade again. Well don't give in to that pressure. Especially now when the market hasn't turned around.

Yes, there could be some opportunities that are passing us by. However, you have to think, the chances for us to lose money are greater in these times. So you have to choose, would you rather lose the opportunity to trade or lose the money to trade? I think that's an easy question to answer.

Many say that the bear market will test your patience. Yes, I think that's a valid point. But I think they also miss the more important aspect that will be tested. Your discipline. Many overlook this because greed and fear always come ahead of everything else when the market moves. How many times have we seen this situation or be in it: one of the stocks that you were monitoring suddenly surges upward for no reason at all. Thinking that you're missing the boat, you suddenly call your broker or open your online account to buy some shares. You just have to get some of that and not miss out on the action. Finally, you get your hands on a few shares and you have just proven the old adage, that a sucker is born every minute.

When we let our greed rule our head during trading, we lose all focus on the objective. Our objective is NOT to make money first but rather to make a good trade by finding the stocks which are just about to make their moves and then we get in at the right price. The right price is when it just broke out of consolidation and it starts a new trend. Another problem we have about discipline is that we're not satisfied with small gains when we have them. We always want to have a jackpot in our hands and we want it now! Jackpots come once in a while but never all the time. We need to have that discipline in trading where our first objective is to survive. Never mind if we have a losing trade, but we must remember to keep our cut loss price at a minimum and to keep this tight. Any deviation from your trading plan will spell doom.

So the next time you get that itch to trade, check your discipline first and see if the trade will be worth it. Otherwise, here's some soap for you to wash that itch away.

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