I recently had an experience with a prospective coaching student unlike any I've had before that highlights a personality trait that I believe can be extremely detrimental to trading. The coaching prospect contacted me following a webinar I did for my favorite charting service company. I had offered a coaching special at half price to a very limited number of students and this fellow called and scheduled a session. Soon thereafter he emailed and asked if his wife could attend as well, and, of course, that was fine with me. I believe it is a good thing for a spouse of a trader to have at least some basic knowledge in the event something unfortunate happens to the trader. In any event, he then wrote and asked if he could move up the date for his coaching session and I complied. I guess I made my mistake when I sent the fellow my 5 DVD SWAT (Stockmarket Weapons and Tactics) seminar as a gift to help him prepare for the session. Ordinarily, I provide the set at the conclusion of the coaching session to help refresh students after they go back home, but thought the $199 set might be particularly helpful ahead of time for this student since he was not as advanced as many who have come to me. Anyway, after he received the DVD set, he emailed and wrote that he preferred telephone coaching which is something I do not do until after an in-person session. When I reaffirmed that approach with the student he indicated that he understood and "probably" would go forward with the in-person training. To make an already long story short, he simply stiffed me, not even bothering to let me know he had decided to forget the coaching.
I relate all this not just because it was somewhat irritating, but also to illustrate indecision and vacillation. My prospective student first decided on the training and agreed to the terms and a date. He then wanted to change the date and bring his wife, both of which were fine with me. He then changed his mind about in-person training and wanted to do things over the phone because some friend of his had another teacher mentoring the friend over the phone. He then changed his mind again and decided on the personal session. Finally he again changed his mind and decided not to undergo the training, but rather just kept the DVDs.
While I don't like to be taken any more than the next guy, that is not my point here. My point is that this fellow demonstrated a great deal of vacillation and indecision. First one thing then another and then another and then another. My fear is that the indecision and vacillation are symptoms of a personality that may not be conducive to good trading. Buyers remorse is one thing, but frequent vacillation may be quite another. I have seen traders who worry themselves sick about making an entry and once the position is entered become frozen in indecision when the play goes against them. They may, for example, decide that they will exit if the stock price moves 50 cents against them, but when it moves those 50 cents then decide to let it go another 25 cents and so on until what was once a small loss becomes a large loss because they were unable to make the decision to actually pull the plug. The opposite may also be true where they want to get into a position but delay and delay until they finally get in only as the move nears its end.
I believe a trader must be decisive if he is going to be successful. As I outlined in the recent series of articles, good trading in my book starts with a plan. Decisions are made in creating the overall plan and in planning a given trade. That plan would likely include both an entry strategy and an exit strategy. Once the decisions are made, they should be followed. For example, if a trader has decided he will exit a position when a price falls through a moving average, he should exit when the price falls through the moving average rather than vacillate and decide that "it'll come back" and he'll let it go another dime or quarter or dollar.
We all probably have an internal dialog, and I have found that for many unsuccessful traders the internal dialog results in worry, uncertainty and vacillation. Instead of listening to that internal dialog during the heat of an actual trade, would it not be better in most cases to have decided on the plan before encountering the emotions of an ongoing trade and simply follow the plan? Of course, I don't mean to suggest that once made a plan should never be changed. A trading plan is always a work in progress and subject to change. I do suggest, however, that changes be made at a time when the emotions are not pulling and pushing, but rather at a time when the trader can review unemotionally and contemplate intelligently where and how he can improve his plan.
Incidentally, I did email the former prospective student reaffirming that the DVDs were a gift and suggesting that he align himself with some mentor who has been a successful trader, not one who just teaches, and that he be willing to pay the price for the mentoring because one way or the other we all pay for our trading education. Paying through losses is usually a much more expensive way to go than paying for the education from someone who has proven to be a successful trader.
by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved
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