Hey Market Pilots,
Happy (almost) 4th of July! This holiday is all about America’s independence as its own country, making decisions for the promise of a better future.
Sound familiar? It should. Most traders around the globe are attracted to the markets for the same reason: independence. More to the point, we want to be self-sufficient and provide for our own in a way that we determine is best. But this is easier said than done.
In search for independence, each trader has his own journey with ups and downs. In understanding his or her history, any trader is able to self-actualize into the successful trader they seek to become. I’m not going to sugarcoat it though. Sometimes it can be tough to look back at your old trades… maybe when you thought GE was going to $75 or TSLA was going to $0 etc. You get the idea.
But these opinions are okay to have so long as you have good trade management. I can’t tell you how many times I thought a stock was going to go to the moon, only to have it go completely the other way. Every trader is wrong frequently, but it is the management of being wrong that is important.
So how do we manage being wrong?
First, you use stops. Or at minimum, you have a way of determining when you are wrong because the goal is to damage your account as little as possible. Second, you find a trading method that has a level of consistency that works in your favor. These are the two basic components of trading: a way to make money and a way to prevent loss of too much money.
As humans, we don’t know how to actually do either of these things when we first get into trading so that is where history comes into play to assist us. We must study the history of the market in order to understand where it will go, much like how we, as humans, must know our history, so we aren’t doomed to repeat it as a wise man once said.
So it’s no secret that humans have the amazing ability to adapt and learn quickly as we have demonstrated this strength time and time again through the progress of our civilization. But what’s less known, is that in this same way, we can grow our trading accounts. We just have to take the time and be open to learning.
Stiff losses and big mistakes are the teachers we need in the market. They sting but leave an indelible mark on us, one that helps us change our trading behavior for the better and avoid repeating whatever went wrong. Without history, we couldn’t learn, so I cherish the ability to study history and celebrate on America’s Independence Day. On this holiday, you should celebrate your trading history too, because one day, I know it will provide you with the independence for which you are looking.
Over and Out,
Your Profit Pilot