Logic – Remain Disciplined

Discussion in 'Trade Journals & Stock Tips' started by alphatrends1, Aug 14, 2015.

  1. alphatrends1

    alphatrends1 Member

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    Before you enter a stock, make sure you have a solid plan for every stage of the trade life cycle. This means knowing your entry, initial stop level, potential price targets, size of the trade and trade management. Once you have a position in a stock you need to manage the trade based on “the message of the market.” Stick to your methodology and never drift from your initial plan.
     
  2. baudwalk

    baudwalk Senior Investor

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    Stick to your initial methodology and never drift from your initial plan? I don't pretend to have the marketing hutzpah exhibited in your business website, but I really question your assertive statement. Rigidification is, in my opinion, dangerous without knowledge of ramifications. External unpredictable events do happen from time to time, and reasonable flexibility and actions are required on occasion. Stock trading, as opposed to investing, may be a risky business for a newbie. An unexpected loss of principal could be discouraging for a beginner.

    An obvious example is the recent surprise announcement of the yuan devaluation inducing an immediate significant ripple effect in markets around the world. The 9/11 attack on the WTC, the 1990 invasion of Kuwait by Iraq, and the 2011 Japan tsunami are other such events that come to mind.

    FWIW I recognize your approach of making money in the markets is clearly different than mine. That's fine by me. I'm still learning after my first investment in Burroughs in 1963 and I think I know my limitations and risk tolerance. I am no expert. I've been on this board only a short time but it's clear to me that the members' skill sets and willingness to accept risk vary widely. Nothing wrong with that, but members' wants and needs vary. No one needs to get hurt here. Rigidity can hurt. Just sayin'.
     
  3. My401K

    My401K Well-Known Member

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    I think perhaps by the term "rigidity" you might have meant not to be "emotionally attached" to a particular stock. When one considers "logic" it is pretty well accepted that it is something you do without emotional attachment. That is all fine and well...and actually pretty sound advice, so many people get involved in the market and they become emotionally attached to a particular stock that might turn out to be a dog. They lose their shirts thinking that at some point the dog will turn around, but it doesn't. Or the belief is a former high flyer will regain ground it lost because statistically it was good in the past. Even if there are enough warning bells in the prospectus or via press releases that should be justification enough for that stock to be considered as a potential risk.

    At the end of the day that's what it is all about- risk levels. Whether you are systematic or lackadaisical in your approach to investing it has to be understood that there are never any guarantees on an outcome. You can try your best to insulate yourself from some risk as much as possible by being informed. That is about as good as it gets, there are no sure fire programs, methods or ways.
     
  4. baudwalk

    baudwalk Senior Investor

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    No, I wasn't opining on an emotional attachment to a stock. If you look at the alphatrends.net web site, my interpretation of the material was that a client could become a successful stock trader in 3 weeks by learning how to devise a definitive plan of when to buy, sell or use options for each selected stock. Perhaps I didn't articulate my point clearly, but such rigidification in my opinion leads to failure. External forces, such as the examples I mentioned above, can wreak havoc.

    Since retiring a few years ago, I have the freedom and capability to watch, live, the interaction of markets as daylight arrives in turn to Japan, Australia, China, India, the Middle East, Europe, New York and Chicago.Tip a domino anywhere in the chain and see what happens. I understand why Jim Cramer and other traders sleep 4 hours a night. FWIW I get more than 4. :)
     
  5. atanasster

    atanasster Active Member

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    I am also more of an opportunist than "never drift from your initial plan". Things change and it does not make sense to never change your initial plan, unless you have very little time to follow your portfolio, but in such case I would say an index fund is better.
     
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