Thursday, March 18, 2010

Trading can be sooooo boring and frustrating!

Trading profitably is about making money and not about excitement! This can seem a big irony to first time investors/traders as excitement is usually one of the main reasons most of us get involved in the first case.

For instance, as of yesterday, I have been 100% long of CHOP. The trade is working in my favor so far. This is good. However, all my buying power is now tied up so I can not take new set ups. All I can do now is relax while CHOP either continues going higher or reverses and stops me out. Which means there is essentially nothing for me to do in the time being apart from research.

Most of the trading books out there do not tell you this. Take for instance, the book How I Made 2 Millions in the Stock Market by Nicolas Darvas. This happens to be one of my favorite books. In his book, Darvas tells you about how he initiates trades from around world and then a few months later his profits are a few hundred thousand and then later a few million. I guess for him it was genuinely exciting especially with him being half way around the world and occupied with his dancing most of the time.

But what about the average guy who nowadays has almost continuous access to the internet whether via computer or smart phone even while we are on the job? What do we do in the seconds and minutes that tick by slowly when our positions are idly zig-zagging back and forth intra day and it seems the day will never end?

This is one of the two hardest parts of trading in my opinion. And they require extreme discipline and patience.

The other aspect is keeping and waiting on stocks in your watch list to set up according to your rules and criterion. I trade primarily off daily bars. So it can take weeks and sometimes months before a stock I like fundamentally offers a technical setup that I like. So sometimes I get impatient and either remove the stocks from my watch list or ignore it all together. Only to see it on a new highs list or on some one's website or blog after it has set up and subsequently made a huge move.

An example is STRI. I had this stock on my watch list ever since early January when I had discovered it in the recent IPO section of IBD. I then held it for over a month on my watch list before becoming disenchanted and discarding it. Only to find out that last night it announced positive earnings guidance and is now up over 9% today alone after already running up over 20% from a set up I would certainly would have traded. This morning I would have been cashing in into this strength for a 30%+ profit or 60%+ on margin!

However, that is the way that trading goes. All we can do is learn from our mistakes and try our endeavored best not to repeat them.

No comments:

Post a Comment