Trade The Journey

Trade The Journey

First week of Preparation!

Top of the Morning. I hope this week reaches you in good health and positive spirits.

There is much to consider and reflect on during these unusual times. How will each country emerge from the Virus? In the United States, the question is multifaceted.

How will we emerge from _______?

The racial tensions
The Federal Reserves stimulus
The Coronavirus
High Unemployment
A highly leveraged environment
A widening socioeconomic gap between rich and poor
Emerging Countries eager to take the Number One spot
Currency War
The current Administration

These are but a few of the issues facing the United States. The dollar, one of Americas’ most valuable assets, is based mainly on confidence. It is a valued currency used all over the world and is thought of as a storehouse of value. Some fear that the dollar may lose its influence with America’s current troubles. Countries may no longer view America as the stable Economy that it once was.

 

Greed may have overtaken their Economy, and to preserve the Greed, they may be capable of anything.

If this did happen, the Economy, as we know it, would cease to exist. No more would we be able to live an inflated lifestyle. We would return to being a nation of savers instead of spenders out of necessity.
My fears run deeper, but I am also hopeful that we can emerge from this on a new footing.

I’ continue to reflect on how we may emerge from all of this back to a sense of normality. How will companies fair in this unexpected crisis?

I suspect most companies will emerge high leveraged if they can survive. Most companies’ business models will completely change to cater to the new Economy centered around technology. As the Virus continues to remain vigilant, so do the request for less social contact and more convenience.

 

When a vaccine ends the Coronavirus, how will you transition back into everyday life?

Will you remain cautious? or will you have grown accustomed to the convenience of working and running errands from home?

Even my parents are beginning to use mobile banking, which I thought was a technological feature they never would.

While turbulent times may not be ideal, they do create volatility in the market, and volatility is needed to make money. Stocks have swung widely with each new development on the Coronavirus pandemic. The pandemic has become a trend within itself.

The fears are ebbing and flowing with each new headline or potential breakthrough. Magazines have heralded the new trader, unafraid to trade in this confusing market and making money while experienced investors remain cautious. I see Instagram and Facebook posts highlighting the winning trades made by traders eager to compete.

Warren Buffet has repeatedly been singled out as unable to adapt to the new market and its type of trades. He has continued to pile cash and wait on the sidelines.

When I first began study investing, I thought the stock and the company offering the stock was all you needed to know. I confusingly thought trading and investing were the same without understanding that an investor is truly a business and macroeconomic analyst. Trading is primarily a contact sport that is based on price movements and raw human emotion.

Warren Buffet isn’t a trader; he’s an investor. With many years of consistent returns, I’m less eager to count him out. The beautiful part about investing and trading is that its mostly mental performance that earns a profit. He is still as sharp as ever which he displayed in latest interview.

So be cautious but bold.

 


This week marks the first week of swing trading for me, although I have been studying for years. Nothing beats competing in the market. There’s no place on earth more transparent.

I’m not saying that markets don’t become irrational, I’m only saying the result of your strategy or thinking is immediately returned. The price is always correct, whether you paid more for the asset and sold it for less or the other way around.

I’m proud to say I have been in some losing trades. I missed clues to exit, forgot the stock’s name when attempting to enter a position away from home, and hesitated to enter a stock in an evident bullish trend.

My rationale for missing the entry was that I had defined a rule that stated, “No position without completing my homework.”

Homework includes analyzing the stock’s trend and price movement, honing in on the swing highs and lows, and forming three scenarios for the next day’s activity. At first, I felt like homework was unnecessary, being that I could analyze the markets while trading.

But the Master Traders keep a journal and complete homework, so I thought it to be a good idea I do so as well.

Over the week, I found that reflecting on my experiences and preparing for the day ahead helped me improve. It wasn’t that I was any more right than before; last week, I only had one profitable trade. However, I felt more confident that I could adjust and spot reversals in a position quicker. The probabilities will eventually end on my side.

Forming a gameplan involves preparing for scenarios that could happen. It opens your mind up to the opportunities that the unprepared are only likely to notice at the market’s close.

I highly recommend finding some of Mark Douglas’s videos and books on the psychology of trading. After preparation, Market performance becomes psychological.


This week in Review:

I’ve continued to lower the discretionary spending each week. Soon, I’ll be down to zero in discretionary spending, and I am eager to make this a reality. It’s been a process ultimately shifting from buying what I want to only buying what I need.

When you first began the shift, you rationalize all purchases as necessary. I needed to purchase these tennis shoes as a reward to keep my morale positive. I worked hard throughout the week for a boss only concerned with my production, and I want to enjoy myself.

That may be true, but it’s also true that you worked hard for Nike as well. They received your cash, and you sacrificed your hours. Initially, you sacrificed your hours, and you received the money.

Example:

You are an astute investor and saw an opportunity to purchase Nike at around $70.00 per share during the recent downturn in March. You brought three shares for a total of $210.00. In June, you decided to sell the shares at $100.00. Your investment earned a return of $90. That’s enough to invest again, purchase the Nike’s, or save. 

In the end, you never paid Nike.

Nike paid you.

As a byproduct of their hard work, the value of their shares raised because more people valued the company as an investment.

Nothing wrong with paying Nike for a product you enjoy. But who should be paid first for your hard work, you or Nike.

I have now turned my attention to credit, which I was less eager to confront. Luckily I own one credit card and store credit card, so I’m not too far away from having zero consumer credit.

The past week deserves the grade of a “B”.

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