Trading Psychology, Discipline, and Tactics

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JBabs	# Posted: 19 Aug 2009 12:47 Reply Tom I enjoyed your pieces on trading psychology. You can be the best chart and fundamental reader but if you don't understand the psychological aspect of trading and have discipline, then you are aiming and lighting a canon perfectly but waiting for the conclusion standing on the wrong side of the barrel. It took me by surprise how much more stressful a run up was then a decline. If it starts down past a support line intraday then I wait for a bump back intraday and cashout. So far this personal rule has been statistically benefital in my favor. A lot of disappointment but little stress due to the fact I still have most of my money to reinvest. Worse case is I am stuck with the stock and I still have the h word that has become so popular lately. Hope that one day it will run back up. The run up on the other hand is truly a testament to a man's( or woman's) will. You cash out to early and beat yourself up. Wait to long to cashout and you get angry that you were to greedy not to take the money that was in your account. I agree with your post that you shouldn't feel bad about making 5-10% but when you realize that you could of made 100-1000% it takes a lot of reassuring to heal the hemorrhaging knife wound feeling in your heart over what could of been. The same is true visa versa and stays with you in your mind on every run there after. Its a strange occurrence that we all experience and taught me(actualy made me to keep my sanity) to view all future trades on a statisticle level. For example after a large spike in volume, a drop in buying volume levels day to day, settles down at price lows at end of day, stall on MACD hist, run lasting longer than two-three days after reaching overbought levels(rsi and mfi), breaks 100% gains( if fundamentals look good cashing out base money and riding freebies), and or intraday pricing(morning and after lunch gains verse eod settling) are some personal rules I use as indicators to exit with profits. Statistically I have been successfully in exits with little regrets because I know I can say the odds were either in my favor or not statistically. Emotionally detaching myself from decisions. To anyone reading this I am a rookie to the game and constructive criticism is appreciated and accepted with an open mind. For any newbies following my words blindly is not a good idea because I am still evolving my ideas and tactics, but if you use my experience as a base for developing your own statistical advantages, study Toms posts on bestonlinetrades.com and pennystockspennystocks.com daily, and study chart school on stockcharts.com you will be a happier trader for it. GLT Jerod __________________
TomAdmin Admin	# Posted: 19 Aug 2009 15:53 Reply Good Post Jerod, For someone that only started trading since February of this year it sounds to me like you are really advancing fast. When I first started I don't remember having too much of a grasp of the basic indicators and sell points based on indicators like you do. So congrats on that. I can tell you one of the worst penny stock trading decisions I have ever made was when I started buying a penny stock called Loftwerks near the price of .003 . It eventually became Souija Brothers but I forget the symbol. Anyway I was buying it when it was Loftwerks and then on the exact day right before it started its launch I sold all my shares for some silly reason which I cannot remember now. Anyway that stock went on to eventually reach .15 cents, but then crashed after that. So yes it was clearly dissapointing but I have moved on. There is always another trade out there and many good setups. Sometimes they are not that easy to find but there are still out there. So never let regret enter your mind for too long because it can be a distraction for longer term goals. The other key point about when to sell is to realize that most stocks whether they be pinksheets OTC BB Stocks or Nasdaq stocks behave the same. They spend most of their time going sideways or trading in tight, narrow or wide channels. Some of them slowly travel upwards or downwards along a trendline. But occasionally they tend to spike and usually the spikes do not last longer than 2 to 3 days and with good reason. Because people want to take profits after a spike.. After a stock spikes it tends to use up the cause that it has built up over time and so the risk of holding becomes greater and greater. So how do you know when to hold a stock for longer than 2 or 3 days during a spike? The key is to only hold the stocks longer when you know that they have built up a very large amount of cause or trading range or are breaking out of a very large pattern. For example, if a penny stock was breakout out north out of a 1 year head and shoulders bottom formation there is good reason to hold it for maybe a 1month or two and just realize profits from the longer term breakout. The thing with penny stocks is that they tend to deliver very large returns and so greed enters the equation. But just keep in mind that if you are able to consistently generate 10% returns on 100 penny stocks, over time you are going to be very successful. But don't get me wrong, you should try to maximize your profits when the opportunity presents itself, it all depends on the right mix of factors to be in your favor. One other thing I would keep in mind since you told me you started in February. February March of this year was when we made a major bottom in the overall bear market. So we have gone almost straight up since then and right now the euphoria is spilling over into the penny stocks. yes there will be always penny stocks that are moving regardless of what the market is doing. but I doubt there were too many penny stocks moving up during the October 2008 time period. So my tip is to keep a general idea of where we are in the market cycle so that you know when to stand on the sidelines and be more cautious. Right now we seem to have good shot at continuing higher for some time still maybe into the end of this year. __________________ http://www.Bestonlinetrades.com
MarronDany Member	# Posted: 25 Jan 2010 02:00 Reply Excellent post.....this case study gives me a lot of things to think about. I think this would be nice and helpful to others. __________________ http://www.stockrich.com/

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