Trade The Journey

Trade The Journey

Switching Lanes!

Top of the Morning.

I hope everyone enjoyed the Fourth of July celebrations responsibly. In my neighborhood, fireworks continued to go off into the ween hours of the night.

My dog is usually beside himself and eager for the night to end. The fireworks went on for so long that eventually, he grew tired and ignored the noises so he could go to sleep. The government officials recommended that everyone shelter in place and celebrate the holiday from the safety of their homes. Unfortunately, that was too much to ask, and people gathered to celebrate their freedom from isolation.

I can’t say I blame them. The world is in disarray, and for many of us, relief may not be in sight.

Since I wasn’t going out, I decided to make use of my time by virtual trading. Virtual trading is akin to the real thing except for real money. It’s a great way to practice entries and exits and gain experience in watching chart patterns develop.

An essential skill you gain by practicing is creating a sense of timing. No, I’m not referring to timing the market because that is near impossible. What I speak of is more of a sixth sense.

It’s not that you know where prices are going to go, but you have a sense of where they may go by having a few scenarios in mind about potential price movement that puts you ahead of the curve. Only by seeing thousands of chart patterns can you begin to do this.

Since I’m not in the ideal financial situation to be trading, virtual trading is the next best thing. I’m the first to admit that the two experiences are not equal, especially when real money is on the line. I’m still learning to trust myself when my money is on the line. Often I see patterns develop and exit the trade, only to reenter and get crushed when the stock moves against me.

 

The most intriguing aspect of trading is watching chart patterns develop.

 

Behind those actual patterns are people, institutions, hedge funds, pension funds, and now the government causing the candlesticks to move. Charts are the result of crowd psychology in action. Conceptually I understand this to be accurate, but accepting this fact, in reality, is quite different.

If I accept this fact, then I have to admit that I don’t know what will happen next. If a pension fund decided to liquidate its position, would I know the reason?

If I were short, I’d make a lot of money on the trade without knowing the real reason. If I were long, I’d assume it was something that I missed—more analysis. Trading psychology at its finest.

I guess those ideas and concepts taught by Mark Douglas have positively affected me.

 

Trader psychology directly relates to timing.

Timing is defined as the choice, judgment, or control of when something should be done. Choice, judgment, and control are intangible assets that no one can teach you. Only by witnessing numerous scenarios can you identify the proper method of action. You can sense it. You can feel it.

Its a boundary of emotion that, when passed, can provide excessive profits or dramatic losses. I thought that by reading and completing more analysis, I’d correctly identify the movement each time. Only by loss after loss did I discover that it was an exercise in futility.

I’d venture to say that in most cases, my losses compounded staying in a position. This has to do with timing because with experience, you have a sense of where price may go.

With each trade, you discover the choices available to you in selecting a potential position. You have a choice in whether this is a short and long position and where to place stops. Looking at the previous days High and low, the overnight market and the days’ opening provide criteria for judgment.

Finally, you are in control of when and where to exit a position. I’d say that timing is the hardest skill to develop because there are so many variables. It’s a skill that can serve you well regardless of your profession or endeavor. Timing is psychological and so is trading.

I’m going to be changing the format of this site to focus on three industries: retail, construction, and technology. I’ll still be updating the blog because its a form of journaling for me. Most of my investments and trades center around these three industries. So be on the lookout for more information.


This past week in Review:

I’ve been making a serious attempt to save at least 75% of the money I earn. I am also paying down the personal credit I have accumulated. It hasn’t been easy transitioning from budgeting to extreme budgeting, but I feel it’s necessary. I am uncertain of the outcome we face in several issues circulating the current event headlines.

I am hopeful but cautious. This past week, I’d like to give myself a “B” for continued improvement and discipline.

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