Monday, May 14, 2007

I Think I Whined Too Much

Last week, I devoted a lot of space to a loss I incurred in a position that gapped down. No loss makes me happy, but that one was particularly annoying. Many of you wrote sympathetically and more than a couple offered trading suggestions. Thank you for the support.

For more than thirty years I was successfully engaged in another profession and a little more than seven years ago, I became a professional trader. By "professional trader" I mean someone who trades for their livlihood. I don't make a substantial income from editing services or giving seminars, I make my income from trading. When I decided that trading would be my second career, I did everything I could to learn everything I could about trading. I attended seminars, I read books, I watched videos, I talked to brokers, and I talked to floor traders. I sought every bit of knowledge I could get from every credible source I could find. All that effort has paid off for me. I have a passion for trading and it has treated me well. I have the lifestyle I've always wanted. I can spend time with my family, I can travel almost whenever I want (as long as I can hook up a computer), I can volunteer in the community and I can set my own hours -- oh, yeah, and I can pay the bills.

What are the keys to what I consider to be my success? I'm sure there are many, but the two that I consider to be head and shoulders above all the rest are knowledge and discipline. Even after my years of trading, I still seek both and suspect I will continue to seek them until I hang up my trading guns. I try to make each trade with a disciplined entry and a disciplined exit and want to learn something from each trade. No matter how carefully I apply my knowledge and how closely I discipline myself, I know some trades will be losers. The fact is, a good trade can even be a losing trade. Think about it, if I make a good entry from sound technical analysis and have an initial exit that is close to my entry and clearly defined, there is little more that I can do. If the stock turns against me and I adhere to my initial exit plan I will suffer a loss, but only a small one and that can be a good trade, can't it? It is a good trade because it is a wisely disciplined trade. I can't control the direction of the market or the direction of a stock so if my initial hypothesis of the direction is wrong, I am best served by getting out quickly before the loss mounts too much..

I know I can't or won't do everything right every time. Sometimes I am imperfect. (I find that hard to believe, but it's true). Recognizing the imperfection and knowing I may err in some trades, I should take great solace in my overall success. All of this to say I think I whined way too much about the losing trade last week. The positives are important. In that trade, I made a good entry, I exited when the stock gapped down through support, I adhered to a money management plan and I'm still in the game. This week was better. I should probably bite my tongue for even thinking this, but it is starting to look like the markets might (emphasize "might") be ready for a little upswing into the fall. August, September, and October are traditionally thought to be potentially weak months. If so, there could be some great buying opportunities ahead. That is true even if the bullishness the past week is a return to an uptrend.

Bill Kraft, Editor
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