Leave Emotion Out of Stock Trading
The amateur will allow greed and fear control his or her actions. He or she will either take profits too early or exit a position too quickly. Constantly looking at the P&L and tracking every tick on a trade whereby your time frame is multiple days to months is a sign of an amateur trader.
Follow Your Trading Plan to a T
For technical traders, this means that you enter a stock when you're indicators tell you to and exit the stock if it hits your stop or target. The stock may move higher or move lower after you buy or sell the stock in a week or two, but you set the stop/target at that price for a reason. If you feel like it wasn't a good stop/target in the first place, then fix that on your next trade. The reason you have targets/stops is to manage your risk. Remember a paper loss is a real loss
. Don't get emotional about the trade. Take the hit/profit and move on.
Focus On Not Caring
As traders, we view stocks as investment vehicles that either take your money or give you money. Stocks don't care whether or not you bought at $20 or you already sold at $15. It does what it wants when it wants to. Stocks prices reflect supply and demand. The more people who want a stock the higher the stock will go up. The less people that want the stock the lower the stock price will go. Take the emotion out of it and focus on trading based on price action. Just be a honey badger and stop caring so much about winning every trade.
Avoid Looking At Your P&L
We often get very excited when we see a huge gain in your portfolio. Similarly we often feel disgusted when we see a huge loss in our portfolio. If you set your stops properly with proper position sizing, you'll know that your stock is fine until it hits your stop. This is given the fact that your stop is set at the point in which your theory about the stock has been disproved. Therefore, even if your P&L shows a loss of $200, but you gave yourself $500 maximum loss on the trade, that red loss may be temporary. Trust in your trading plan that you will cut losses and let gains run.
Labels: Finances, Pro Stock Trading Tips