I have learned much about markets. The sheer extent of everything that's involved with markets is truly amazing. Two years ago I didn't even know what the whole bull/bear thing was about and now I find myself investigating credit cycles and speculating on how the drop in oil prices will affect emerging markets. The Psychology, the waves, the way the whole thing works is spectacular and immensely interesting.
Perhaps most importantly I have learned the valuable lesson of what's most important in this business. There is one thing that you must always keep blazon in the front of your mind at all times. It is easy to get distracted wandering around aimlessly in the halls of speculation and the macro. It is easy to get lured by the pixies of pride and ego, eat the apple from the snake of greed. The market can be fun and exciting, certainly never dull. But remember this: You trade for one reason and one reason only: Trade to Make Money.
It all sounds so simple. I stated in my very first blog post that I am in these markets for one reason, to make money. That is in fact the only reason to be in this business. That is the job description. We aren't exactly saving the world here. We really aren't benefiting society in any way through trading. We are merely trying to profit on the gyrations of the markets. Day in and day out we put our money at risk to make more money. That's what I love about this business though. Wall street has no qualms about what it does. The market serves a purpose. That purpose is to generate and preserve wealth for anybody who dares to get involved. The stock market is a pillar of and the greatest invention of capitalism the world has ever known.
Now as I wrap up my second year trading. I find myself reminiscing on what has worked for me and what hasn't. What have I learned?
Reduce Positioning and Increase Patience for Swing Trading: I made and lost a ton of money swing trading. Swing trading can be that fine line between investing and trading. When you hold a position for extended periods of time you must have a lot of confidence that you are correct and also a lot of patience because the moves that you envision, if they do actually happen to play out, usually take much longer than you originally anticipate. If you are taking that overnight risk it is imperative that you have a rational and conservative position. Never load up the boat in anticipation that you cannot be wrong. Endurance in trading is not about how much you can make but in how much you don't lose. I had both success and failure in swingtrading. I think that it's a viable way to make money in the market but it is not without a high level of risk. That overnight risk is just very hard to account for. I think that success in swingtrading is a long, arduous, journey, with massive peaks and deep troughs that must be navigated.
Trading is not easy. There are no easy battles in this market, every victory is hard fought. Every different trading system whether swing, daytrading, options, stock and forex all have their pros and cons. In the end though thinking back of all the times I made money in the past two years, the easiest money I made, mentally, emotionally, practically was when I DGAF about the ticker. If I didn't know anything about the story, had no preconceived biases, bought into something hoping for profit but also managed risk with a tight stop as I could never be sure how the darn ticker was going to spin around. When I got in, profited and got out, those were the trades that consistently made me money.
You don't need to take overnight risk, you don't need to constantly hit home runs, you don't need to get rich today. Be patient, be disciplined, wait for the good setups, wait until everything lines up perfectly. Take your shot but have plenty of cushion for failure. Sometimes you will be wrong, sometimes you will be right, but it's not about that. It's about making money consistently. It's about surviving, it's about having goals and methodically conquering them. It's about never accepting defeat. It's about learning from your mistakes, getting up and trying again and again, tweaking your strategy, adjusting your approach until you succeed. Keep the losses small and over time the winners will take care of themselves. It is very easy to make money with a logical trading strategy, but only if you are disciplined. It is frighteningly easy to lose money with an undisciplined approach. Keep a cool head at all times. Never let emotions cloud your better judgement. Remember that life is not all about the money, but trading is. Make that Money