We’ve all felt it: an investment we’ve made in a stock is up! You start to think of all the things you could do with your returns – pay a bill, buy a house, upgrade your cell phone, re-invest to make more money, buy more shares, etc. It’s a great feeling. But then, before you can sell, that trade turns against you and is now negative. Now you start to think of all the mistakes you made, how the market is against you, and how it’s just not fair and everything is terrible.
Take all of those feelings, box them up, and ship them out. It is crucial in trading to have no feeling at all, win or lose. Your brain and body can’t take the ups and downs of each and every trade if you are constantly flip flopping between euphoria and depression (sometimes in the same minute)
It’s fairly common knowledge that the hardest thing to do is sell and investment. My view is that after you close a position, your brain tells you that you must immediately open something else. It’s human nature to want to progress forward, do something, and also take risks (no matter how minor or major).
BUT opening your next great trade involves many many things. What it DOES NOT involve is getting into a trade based upon when you closed the last one. If you can understand and embrace that simple statement, you are well on your way to being a better trader.
At HRT, our strategy is always flip flopping from long to short, we have developed a strategy that is “always in”. This actually negates needing to find that next great trade. I love it, and our clients love it.