How to Stop Missing Trades

 
Missing Trades can be incredibly frustrating.  We put in the work, the analysis, create a plan… And then for one of a dozen reasons we end up missing the trade.  This is something that used to happen to me all the time.  It was infuriating!   …Not only because of a bruised ego, but because I’d begin to think of all the things I could have been doing with my time.  
 

How to Stop Missing Trades

In this post, I want to give you a few tactics about how to stop missing trades.  These are the tactics that I use presently and have helped me a great deal.  Don’t get me wrong, I still miss trades.  We can’t catch them all.  Part of clarity, focus, and trading in the present is having an understanding that there are literally millions of opportunities in the market.  We couldn’t possibly trade them all even if we wanted to.  

 

1. Build and Maintain Watch Lists

One of the lists I enjoy building, actively maintaining, and reviewing once a week is a “Universe List”.  This is a catchall list that houses every stock that I’m interested in for one reason or another.  Maintaining and reviewing this list consistently every week keeps me in tune with what each of the stocks are doing.  There are typically about 100 stocks on it at any given time.  It only takes a few minutes to scroll through each of the charts.  I find that it is well worth the effort to keep a pulse on what I feel are the most interesting ideas.

I’ll also keep separate lists for where the ideas came from.  For example, I’ll keep lists of what passes our ChartYourTrade MRI scanner by 80% or more on a separate list because these stocks have shown to have a greater probability of producing a significant run after having passed the scan.  Check out the 2016 case study here (2017 case study will be coming soon).

 

2. Pick a time frame and trade within that time frame

One of the things that used to trip me up would be to try to trade multiple time frames and multiple strategies all at the same time, all within one account.  I thought I was optimizing my trades.  Instead the only thing I ended up optimizing was how to lose in a hurry!
 
Now my accounts separated by time frame and I stick to one set of rules per account.  I have separate accounts for short-term swing trades, intermediate-term trades, and long-term investing for things that will be held for longer than a year.  Prior to entering any trade I’ve noticed that it is important to clearly state our intention for the trade.  It’s something that has helped keep me focused as the trade progresses.
 

3. Develop Plans, Systems, and Processes for Consistent Review

If we’re inconsistent with our work, it becomes dramatically less meaningful and it will be far more difficult to make progress.  This is another lesson I’ve learned the hard way.  What I’ve learned to do is figure out what I’m capable of given my circumstances and ambitions.  Then I’ll look at the worst case scenario.  For example, if things begin to get insanely busy at the day job for an extended period, or if something significant happens with my family and my schedule is thrown off, how can I still successfully manage my trading?
 
I’ll think through these worst case scenarios and figure out the critical path for my trading.  What’s most important, what must get done, and how long will it take.  I then look at my calendar and find blocks of time where I can consistently do the elements on my critical path.  
 
For me, the weekly critical path includes Identifying Market Health, Understanding what stocks and groups of stocks are leading the market, Identifying trades, Making plans for those trades, and reviewing my existing trades.  This may sound like a lot but it typically only takes me about 30 minutes in total over the weekend.  
 
 
Check out the video above for greater depth.  Be sure to leave a comment below with any thoughts or questions you have.

Meditation might be the SECRET SAUCE of Successful Trading

 
You’ve probably heard me mention this a few times, but something that has helped both my trading as well as my everyday is is meditation.
 
I was very skeptical of meditation at first and thought it was a waste of time. Sitting there…just focusing on breathing… doing this for 15 minutes or so at a time… I’m struggling to find time as it is, why spend 15 minutes I don’t have on something like this???
 

I couldn’t have been more wrong!

 
So far that 15 minutes in the morning has actually added up to an hour back in my day! I’ve actually measured the time tasks would take me and estimate the amount of time needed and I’m often finding that what would take me 90 minutes would now take me 50 minutes. Then in another portion of my day, tasks that would take 60 minutes are done in about 40…
 
It’s not that I’ve gotten better at the tasks. Its that through meditation and carrying that practice with me throughout the day, I’ve been able to focus better than I ever have previously and not be distracted in an increasingly distraction filled world.
 
 

Have you tried meditation?

What has been your experience with it if you have?  Leave a comment down below.  If you haven’t tried meditation yet, there’s a really great app that provides guided meditation.  
 
If you haven’t tried meditation yet, there’s a really great app that provides guided meditation.  It’s called Headspace.  This is the app that I personally use to help me meditate and I use it daily.  They offer different themes including a “basics” one which I tried initially and it really helped ease me into the idea of meditation.  It started off with 3-minute sessions and it allows you to select the amount of time you’d like to spend meditating.  At the time, 3 minutes seemed like an eternity to me.  Now I’m barely warmed up with 3 minutes… it’s kind of like physical exercise in that regard.
 
Anyway, give it a shot and let me know what you think of it by leaving a comment down below.
 
If you’d like to check out my progress thus far, check out the 5 minute video up at the top of the page.
 
You may also want to check out Beth Marconi’s post on meditation for some additional info.
 
 
 

What to Consider When Setting an Initial STOP LOSS

Where and when are we going to exit a stock if we’re wrong?

Unfortunately, this is a question many of us overlook until it’s too late.  Most of us only consider the upside potential when we’re buying a stock (at least that’s how I used to think when I first started).  If we don’t know where we’re going to exit if we’re wrong, then by default we are risking everything!

Actually, lets play this out…

Let’s say we’re interested in NFLX which has been on fire as of this writing.  It’s presently trading at about $315.  We do our analysis and based on what we’ve found, we determine that it has upside potential to +$700!  We decide to buy it right now at its high of $315.  We are so confident that NFLX will continue to rise that we don’t set a stop loss, nor do we consider where we’ll exit if NFLX comes back down… in fact, we tell ourselves that we hope NFLX does fall down to $200 so we can BUY MORE at this cheaper price!

Several weeks go by and we see NFLX climb steadily higher… it hits $400/share!  Then…something starts to happen.  It got ahead of itself.  It starts to pull back.  We think about buying some more shares as it hits the 21ema which is now at around $350.  

We double our position at $350 sure that this is a momentary pullback… we were right the first time.  We’re smarter than everyone else.  The market is wrong!  

Tomorrow NFLX starts to rally…

It gets up to $355. YES, we did it again!  WE KNEW IT!

We go out to lunch and by the time we come back, NFLX has reversed and is now trading at $345… no worries, by the end of the day it will climb higher…  we are right again!  NFLX closes at $349, just below the 21ema…

The next day NFLX gaps down to $325.  What’s wrong??  We start googling for news, checking our social streams.  We want to know WHY this is happening.  

Meanwhile, as we are trying to figure out why NFLX gapped down, it is now at $315 and is resting on the 50dma… Hmmm…based on what we know about technical analysis, institutions tend to step in at the 50dma and defend their positions… THIS IS A BUYING OPPORTUNITY!  We buy some more shares.

NFLX closes the day and closes the week sitting right on the 50dma.  We’re excited to have gotten in at such a good price…but now we’re also a little anxious too… during our search of WHY the sudden drop occurred, we found 5 solid reasons for it, but we also found another 5 people who were saying that this was just a momentary pullback and that NFLX was destined to rebound… The people suggesting that NFLX is destined to rebound are clearly right and our confidence is bolstered!  We sleep soundly that night and through the weekend.

Monday morning comes and “Murphy’s Law” occurs… NFLX and the market as a whole are down and down big.  NFLX is now trading at about $260!  We see someone mentioning how dramatically overvalued NFLX is as it is trading at a PE of over 200.  We never considered PE before BUT maybe this guy is on to something… we start to worry.

By mid-afternoon NFLX is down to $250 and the 200dma is in sight.  We look at the chart and notice that NFLX has traded above the 200dma since 10/2016 AND it received support at it when it approached it in July and November 2017!  We take a sigh of relief… We’ll just hold it for now and see what happens.

Has this ever happened to you?  

Have these types of thoughts ever crossed your mind?  If so, what has been the result?

How to set an Initial Stop Loss

In the video above I discuss the 3 main things I consider when setting an initial stop loss.  It is esstential to ALWAYS figure out what the stop loss is going to be BEFORE entering the trade.  It’s a great way to keep emotions in check and not fly by the seat of our pants.

The 3 main things I consider when setting a stop loss are:

  1. Where is support
  2. How is the stock behaving around moving averages
  3. What is the distance between where I plan to enter, and where I’m planning to set my stop loss.

These 3 elements combined have helped me not lose my shirt, not lose ground when I do have losses, and be able to use the true secret ingredient to long-term success…compounding!  It also helps me figure out my Position Size, which is another major contributor to success in the stock market.  

So check out the video and leave a comment down below letting me know what you thought, if you’ve had a NFLX story of your own, and if you use stop losses in your own trading.

 

Check out some of these other blog posts:

Run your own race – How ignoring opinions will help your trading

In order for us to get to the next level of our trading, whatever that may be, we need to forget about what others think and we need to not get caught up in what other people are doing (or claim to be doing).

 

How other people’s opinions hurt you…

Have you ever fell into the trap of holding a position… a stock, an ETF, an option, a cryotocurrency… and then look at your Facebook, Twitter, StockTwits, or Instagram streams and see someone presenting an opposing view to your own?  How did you respond?  How did it make you feel?  What action, if any, did you take?  …The answers here are crucial!  

IF someone else’s opinion causes us to have doubt, if it reassures us, if it makes us feel that we are ahead or that we’re behind… It causes us to have bias and it causes us to pivot from our original stance.  Unchecked, we may deviate from our trading plans, make emotional decisions, sabotage ourselves and not even realize it!

 

We need self-awareness…

It takes a long time to have both the self-confidence as well as the self-awareness to be able to see or listen to people’s opinions and not be influenced by them… Better yet, to be thoughtfully influenced by them!  …Here’s what I mean…  We need to practice being the neutral observer.  There are opposing thoughts being presented to us on every topic, everywhere, constantly.  Rather than choosing a side, try to understand both sides from a neutral position.  Don’t only understand what they’re saying but understand from where they are saying it.  Understand their “why” and their motivations for saying that they’re saying.  It is then and only then that we are able to accept a meritocracy of ideas and not simply be influenced by the person(s) with the loudest voice or who come across to us as the most persuasive.

I love this quote from Oprah. How often do you get caught up worrying what others are doing? I know I used to get caught up in that frequently and I still catch myself getting caught up in it often enough. This quote is a great reminder to forget about the other guy and run your own race.

Works in running… works in trading… works in life!

Run your own race - How ignoring others will help your trading

 

 

 

Check out these other blog posts:

Review of Mark Minervini’s “Trade Like a Stock Market Wizard”

One of my biggest trading influences was someone I met later in my trading journey.  It’s interesting who we meet along the way and the impact they have on us.  Mark Minervini isn’t just a great trader and phenomenal author, he’s also a genuinely good person who truly wants to help educate others and help them succeed in the market.  

For those of you who don’t know who Mark is, he is one of America’s most successful traders, is a 30-year veteran of Wall Street. He is the Author of # 1 Best Seller Trade Like A Stock Market Wizard; How to Achieve Superperformance in Stocks Mark has been featured in national media including Fox News, CNN, CNBC, Bloomberg, the Wall Street Journal, Barron’s, USA Today, BusinessWeek, and more. He won the US Investing Championship in 1997 with an annual return of 155% and has also been featured in Jack Scwhager’s “Market Wizards.”

Over the years I’ve built a personal relationship with Mark.  It started when I first learned of him and his work after reading about him in Jack Schwager’s Market Wizards series.  At the time I was already several years into my trading journey, had already read “How to Make Money in Stocks” by William O’Neil and was deep within that universe.  Mark’s take on the markets, trading, and how to be successful breathed new life into what I thought I knew.  His ideas were akin to what I had learned from CANSLIM and Investor’s Business Daily.  This fresh perspective enticed me to read his book “Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market“.

I started following Mark on Twitter.  We wrote back and forth for quite some time.  He later agreed to answer a dozen questions in great detail straight from the ChartYourTrade Community (you can read that interview here).  We eventually met up at the Waldorf Astoria in NYC and went to a juice bar a couple of blocks away.  Later on, he even gave a special presentation to us at the NYC Investor’s Business Daily meetup.  This gave me one of my more useful risk management tactics… using bracketed stops.

 

I learned quite a bit from “Trade Like a Stock Market Wizard”.  Here are some of the highlights:

 

Knowledge is the fusion of information over time…

“All you have learned and the experience you have gained can bear fruit for many years to come… truly this is what makes acquired knowledge and firsthand experience the greatest tool to succeed and build upon in stock trading and in life.” 

This is extraordinarily true and as I reread excerpts and highlights from the book, things make far greater sense and have a fresh perspective today more so than they did years ago.  It is true…we never step in the same river twice!

 

Stop focusing on the money!

“For me, the greatest success came when I finally decided to forget about the money and concentrate on being the best trader I could be.  Then the money followed.”

This is something that literally took me YEARS to fully grasp.  I mean, the reason why most of us gravitate to the stock market IS to make money… One of the true ironies of the market is that we finally begin to find success after we stop focusing solely on making money and start focusing on the elements that make us the best trader we can be.  Those two things are not the same. 

 

Clearly define your style with clearly stated goals

“The average trader spends the majority of his or her time vacillating between two emotions: indecisiveness and regret.  This stems from not clearly defining one’s style.  The only way to combat paralyzing emotions is to have a set of rules that you operate from with clearly stated goals.  You simply must make a decision: Are you a trade or an investor?”  

RAISE YOUR HAND IF YOU’VE EXPERIENCED THIS!  …both of my hands are in the air!

In the beginning, you need to focus.  You need to find yourself.  This is something else that took me years to grasp and I experienced this vacillation for years!  The one thing that finally got me over this hurdle was separating my accounts.  I now have separate dedicated accounts for my short-term, intermediate-term, and long-term ideas.  

 

A Step By Step Process…

Mark shares his entire process step by step in this book.  I greatly enjoyed this part of the book.  For me personally it confirmed much of what I was already doing.  I was fascinated by and thrilled to learn that his style was very similar to my own.  Running consistent scans, focused scans, seeing what pops up on multiple scans, filtering down for only the best ideas, running overlay screens, executing trades only at the point of alignment across the spectrum with regard to the company fundamentals, stock price, and volume activity as well as overall market conditions.

Some of the larger points of Mark’s process that stuck out for me include:

  • Finding the exact entry point “SEPA” or “Specific Entry Point Analysis”
  • The Fundamental criteria that actually matters
  • Leading industry groups and sectors
  • Companies with rapid growth in a rapid sector… that are in a sense gaining market share in two ways 
  • Purchasing turnarounds
  • Anticipating news and why stocks often move in the opposite direction after the news is released
  • Risk Management

 

After reading Mark’s full process, the most important takeaway for me in this book is still the part that is common to practically every other book I’ve read about stocks, business, or success in general told in Mark’s own unique way… it’s about mindset!  In order to succeed, we must have the right mindset, we must put in the work, we must understand that we are on a long journey.  What we are looking to achieve is possible, but its a marathon, not a sprint.  

In the early stages of my trading journey and even now, this book is extremely valuable.  Again, you never step in the same river twice…  

 

Some other posts you may enjoy:

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