Out of Town and Discipline Idea

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com

I’m on the road this week, traveling for my day job. I’ll not be trading much (if at all), or blogging, or even Wallstreaking. If you start to jones for your daily dose of emo, then just click my name to go to my blog reruns to tide you over ;)

Anyway, I was reading about Timothy Sikes, whose book Richard profiled a little while back. I was reading his latest blog post, and when I went to make a comment, something struck me to use as a disciplinary trick to keep me from forcing trades.

Timothy gave out his pick for trading in the next session (emphasis is mine):

You’ve been taught to think that you always need another play and that if your money is just sitting in your account, it’s not working for you. OK, here’s my pick for tomorrow:

Nothing!

You don’t need to trade stocks every day, or guess how the market will fare, or how oil will fare, or how Carl Icahn’s rumored blah blah blah might make you money. No! The way I built my wealth so quickly was to wait for opportunities to present themselves–not try to will them into existence. In fact, my largest losses have always occurred whenever I did try to play these guessing games. Yes, that’s correct–you’ve all been brainwashed into churning your accounts far too often and I have a lot of work to do to teach you the right way to trade. So, take some time and reflect, there will be further opportunities, you just need to have patience.

Most of my losers have come from forcing trades when I had no setup, no edge. I constantly struggle with sitting on my hands when there are no compelling setups to trade. I always want to be in a trade! I try to trade all throughout the session, every session. Timothy’s words from above further emphasized something I already knew I was doing wrong. But with my emotional makeup, I always want to be in a trade. Sitting out is painful! I’ve come to realize that for me, losing is actually less painful than sitting out, because I choose to do that rather than sit on the sidelines many times.

Well, I posted the following comment to Tim’s blog post:

Most of my losses come from forced trades. This is good advice, Tim. I need to take it more often! I want to trade all during the day, every day. If I’m not in a trade, I feel that I’m missing out! I was up 30% in two months starting in July, but then I ground it all away back to 0 by trading day in and day out through the September chop.

As I typed in the text in bold above, that thought finally came into my conscious mind. I knew I always wanted to be in a trade, but I hadn’t really thought about it. Writing things down helps to solidify vague ethereal ideas into concrete ideas. This is one of the main reasons I blog about my trading–it helps me to realize things about myself that I didn’t “know”. Many times, when I write something, that’s the first time I really even thought about it!

So what was my big idea to help my discipline problem? Since I always want to be in a trade, that’s exactly what I’ll do. I’ll always have a trade on! I’ve been playing around with the idea of trading several systems simultaneously, one range-bound and one trending, instead of trying to guess which kind of a market we’ll get each day. I’ll implement one of these systems right away. I’ll carve off some small portion of my equity, and continuously trade a trend-following system in something like QQQQ. That way, I’ll always be long or short a small position in the markets, and if I see a good setup elsewhere, one that’s good enough to take my attention away from the system trade I’m in, then I’ll jump on it. Otherwise, I’ll just watch my system trade. No need to sit on my hands, no fighting my urge to be in a trade. I see it as emotional judo–take my weakness and use its power against itself. This should really help the quality of my trades increase. When I’m in a trade, I don’t tend to take other trades at the same time, even some that look good, and that should work in my favor in this scenario!

I’ll post more about my thoughts for this system over the next week. Please feel free to comment about any of this, whether you agree or disagree! And thanks, Tim, for the inspiration!

This post was contributed by a guest author, and does not necessarily reflect the views of Richard or MovetheMarkets.com