Before approaching any venture it is imperative to have a well-thought plan. Making the plan is the easy part. The second you put money on the line you will be bombarded with a dizzying array of information that is designed for one purpose: Shaking you out of your position and stealing your money.
We're humans, we reason, we think, we are creative beings that come to various conclusions about the same thing. That's the market, a competitive public voting mechanism where the victor gains the spoils.
What I'm saying is that in order to succeed it is easy to know what to do. The difficulty comes in having the discipline to follow your own rules.
Here is an example of when incorporting information irrelevant to my Plan and Altering my Strategy lost me money.
The past two days I have been watching oil. Oil has been crashing and suddenly the setup for a quick pop to the upside started to look attractive. I began purchasing shares of UWTI the levered long oil etf. This morning I had bought various oil stocks as well just feeling that oil was ripe to pop. Suddenly I get news that an oil inventory report was being released. I had not even known about this report before I had acquired my positions which was probably a lack of sufficiently planning the trade, but that's the market you never know what's coming and in my strategy a macro report did not matter, only the technical setup. Anyways, I learned of the report and put in tight stops suddenly worried that this report could drastically affect the movement of oil. The report came out and showed a big excess of oil supply and was bearish. I immediately reacted and closed out all my oil longs. I then rashly thinking that if it is wrong to be long, then it must be right to be short shorted oil via the SCO ultrashort crude etf. The move initially proved wise as oil did drop a bit. I was up a good amount on the etf but was thinking in a swing trade timeframe when I should have been thinking in a DayTrade scalping timeframe. The position fell back to break even then rallied once more. By this time it was midday chop and deactivated my stops worrying that they would be ran in the chop. Well randomly midday, actually after the pit close which was odd oil started ripping to the upside in the move I had originally anticipated this morning. I had deactivated my stops and so wanted to wait for oil to come in more, well it kept ripping and draining me. I ended up covering half on the flag and am holding half thinking that was just a quick pop. I was only going to play it for that pop and get out, but sure enough I got shaken out on information irrelevant to my plan, lost discipline, didn't lock in gains, was thinking in the wrong time frame.
It is important to know what to do. It is imperative to block out the white noise and follow your plan.
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