Cap’s Trading Diary 1/2/04
Hi everyone,
I hope everyone had a fun and safe New Year! I will be putting another longer article on the board this weekend, but since we’re coming up on the first trading day of the year I thought I’d submit this short piece entitled:
New Years Trading Resolutions
So, for the year 2004… I RESOLVE:
1. To treat trading as a business, not a hobby. This means determining what my overall strategy is, knowing what tools I need to implement that strategy, and obtaining or creating those tools. It means having a standard routine for the day, i.e. knowing what I need to do before the market opens, during market hours, and after the close. It means that sleeping in, not being prepared (or even dressed!) and wandering over to the computer in a sleepy haze 10 minutes before the open is UNACCEPTABLE. I am the owner of this business, and I would fire anyone else for that kind of behavior. Since I’m my only employee though, if I fire myself I guess I’m out of business.
2. To have a plan for each trade. This means knowing why, when, and under what price and volume conditions I will buy a stock, and it means knowing when to get out. It means that if I don’t have a plan, I will not spend my time during the day trading. I will spend it either creating a plan, working on my planning skills, or checking the help wanted ads for another job.
3. To listen to what the market is telling me. This means trading based on charts and TA indicators. It does not mean trading on hype, rumors, hope, fear, greed, or other emotions.
4. To use my trading day productively. This means that there is no profit to be made by staring at every tick on a stock that is hardly moving. It means that I will use this time to continue to plan, develop trading tools, investigate new strategies, take care of daily accounting tasks, studying TA, and generally work on improving my performance. It does not mean sitting in front of my monitor watching paint dry.
5. To do Due Diligence before buying any stock.
6. To remember that RISK CONTROL is the first consideration in any trade.
7. To never, ever (did I say never? I meant NEVER) average down a losing trade in the hopes that I can get out even.
8. To focus my energy. This means that even though there may be hundreds of good trading strategies and techniques, I can’t possibly keep track of all of them. I would rather make money on two or three strategies that I know cold than lose money on a dozen that I understand less well.
9. To profit from my mistakes as well as from my successes. This means keeping track of why I entered and exited each trade, and knowing what I did right or wrong. It does not mean beating myself up over bad trades, but milking them for every bit of knowledge and experience that I can get.
10. To remember that trading is a means to other more important ends. This means not becoming obsessed with the market to the exclusion of everything else. There is a whole big world out there, and the reason I trade is so I can go out and experience more of it.
