What Not To Do
1. Have an opinion. One sure way to find yourself fighting the market is to have a market bias. Trading with an opinion about what the market will do next can limit your ability to see what the market is actually telling you.
2. Have someone else’s opinion. Adopting some market guru’s market bias is actually worse than having your own. Market gurus are notoriously inaccurate in their predictions. Embracing another’s market judgment prevents you from learning to read the market on your own. Besides, it’s doubtful the guru will be calling you to let you know when his or her opinion has changed.
3. Make your opinion public. Putting your bias into a chat room or forum thread makes it public. Making something public gives it a psychological life of its own. It’s hard to back off an opinion once you have announced it to others.
4. Let your ego get involved. Everyone wants to be right. In trading, you have to ask yourself, “Which is more important, being right or making money?”
5. Ride a loser. Still wanting to be right? Having a bias, making it public and getting your ego involved will cause you to hold losers far longer than you should.
What To Do
1. Anticipate. Avoid having a bias. Identify areas where the market might turn or continue and think through what that would look like. Anticipate the alternative ways the market may trade.
2. Keep your own counsel. Avoid gurus. Learn to read the market and make your own decisions.
3. Avoid the forums while trading. Use the good ones as a source of education, but refrain from making your trades public. Visit them after the market close.
4. Check your ego. Be aware of when you want to be right. Ask yourself, “What is more important, being right or making money?” Then, make the correct decision.
5. Cut losses short. Use hard stops if necessary. When the market turns against you, exit. Always know the point at which your trade idea isn’t working.
Your personal characteristics can have a lot to do with your trading success, or lack of it.