Saturday, September 19, 2009

Sine Metu

I hope the little series of articles over the last three weekends provided some ways in which traders can cut losses and let profits run. The fellow who initially suggested I provide some information on the subject suggested it would be a cop-out to say that there are probably as many ways to cut losses or let profits run as there are traders, but as you could probably see if you read the articles, there are a wide variety of ways in which a trader can accomplish the goals. Much is dependent upon the creation of a plan that is specific to your own needs. In both books, "Trade Your Way to Wealth" and "Smart Investors Money Machine" I talk about the need for such a plan and in different ways show how an individual can construct a plan specific to his or her needs, age, station in life, goals, family situation, and financial status.

Discipline is a first key. Most would-be traders, I find, are unwilling to even engage in the discipline of learning how to create a plan let alone working on its creation. It's my guess that their likelihood of sustained success falls somewhere between slim and none and leans to the "none" side. Creating the plan, however, is only the first needed act of discipline.

As many of you may know, I just had the privilege of traveling through Ireland, an absolutely beautiful country. During our stay, we took the opportunity to tour the Jameson Irish Whiskey Distillery. In addition to learning how Irish whiskey is distilled, we learned how Mr. Jameson went to riches, then to rags as a result of world events totally beyond his control, but recovered to regain his riches. As a result, he was awarded a crest and a motto. The motto is: sine metu. It means without fear. That is how Mr. Jameson managed his ultimate success and the ongoing success of this now internationally renowned company.

Sine metu is a motto that all traders should take into account in my book. If we trade through fear, undoubtedly we will make bad trades. We will cut profits because we may be afraid of a pull back instead of having an exit strategy such as those I discussed in the last article in the recent series or we will let losses run because we are afraid to take the loss and move ahead. With a disciplined approach and a pre-determined exit strategy in place we have the ability to increase our chances of success and proceed sine metu.

As an aside, for any who have shown interest in private coaching sessions, I am now booked through the rest of the year. I take no more than one student a month so if you are interested, you might want to contact me for bookings in early 2010. I am continuing the one day reduced price special in Arizona for January, February and March. It is 1/3 off the regular price for a one day session.

by Bill Kraft, Editor
Copyright 2009, Makin' Hay, Inc.
All Rights Reserved

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Anonymous said...

I believe that you will receive more business and credibility if you post a running log of your buy / short positions and net profit. They can be posted after you make them. And if they are audited posts, that would have tremendous credibility.

Anonymous said...

I read your newsletter every Saturday and always enjoy it. What a breath of fresh air. And help for traders, new and experienced. I have been in the business for 33 years and I can state that what you say rings true in the real world of trading.
Your latest, Sine Metu, reminds me of and old saying from the commodity traders:
"Scared money never makes money". Emotions, Fear primary among them, always have an adverse effect on trading. The problem has always been to eliminate emotion, trade strictly by plan, much as you suggest. The sad fact is that this is the most difficult thing to accomplish and is an on-going struggle, not a obstacle to be hurdled and left behind. The millions of traders that have failed in the past, and the many millions of dollars lost by them demonstrate the fundamental nature of this problem.
I think it was FDR that said "We have nothing to fear but fear itself." As traders, taking risk is just part of the trade. We must do all that we can to look inside ourselves, to find what causes fear and affects our jugement. Only then will one be able to determine if one should even be investing, let alone trading.

Bill Kraft, said...

Anonymous, I'm not sure why you might think I need more business. My living is made trading; I'm in my 60s, and I really have little need for any more business. Insofar as the paid subscription services are concerned, there is a complete Trade Table for each service in which the trade, date of entry, cost, date of exit, and profit and loss are listed.
Bill Kraft

Bill Kraft, said...

Thanks, dsb. I am in complete agreement. I think your point that trading strictly by plan is an on-going struggle, not just an obstacle to be hurdled and left behind is particularly well made. I know I struggle with it in my own trading day after day. Thanks for your contribution.
Bill Kraft

Anonymous said...

Hi Bill,
You have enlightened me(us).It is very down to earth articles. You don't like to talk big. Almost all of your article addressing the common problem that we all facing to be a better trader. Every time I read your article it definitely taught me how to focus and think differently. Thank you. With warmest regards. Frans

Bill Kraft, said...

Thanks, Frans. I hope the articles are helping at least some readers improve their trading.
Bill Kraft