Last week, I devoted a lot of space to a loss I incurred in a
position that gapped down. No loss makes me happy, but that one was
particularly annoying. Many of you wrote sympathetically and more than
a couple offered trading suggestions. Thank you for the support.
For more than thirty years I was successfully engaged in another
profession and a little more than seven years ago, I became a
professional trader. By "professional trader" I mean someone who trades
for their livlihood. I don't make a substantial income from editing
services or giving seminars, I make my income from trading. When I
decided that trading would be my second career, I did everything I could
to learn everything I could about trading. I attended seminars, I read
books, I watched videos, I talked to brokers, and I talked to floor
traders. I sought every bit of knowledge I could get from every
credible source I could find. All that effort has paid off for me. I
have a passion for trading and it has treated me well. I have the
lifestyle I've always wanted. I can spend time with my family, I can
travel almost whenever I want (as long as I can hook up a computer), I
can volunteer in the community and I can set my own hours -- oh, yeah,
and I can pay the bills.
What are the keys to what I consider to be my success? I'm sure
there are many, but the two that I consider to be head and shoulders
above all the rest are knowledge and discipline. Even after my years of
trading, I still seek both and suspect I will continue to seek them
until I hang up my trading guns. I try to make each trade with a
disciplined entry and a disciplined exit and want to learn something
from each trade. No matter how carefully I apply my knowledge and how
closely I discipline myself, I know some trades will be losers. The fact
is, a good trade can even be a losing trade. Think about it, if I make a
good entry from sound technical analysis and have an initial exit that
is close to my entry and clearly defined, there is little more that I
can do. If the stock turns against me and I adhere to my initial exit
plan I will suffer a loss, but only a small one and that can be a good
trade, can't it? It is a good trade because it is a wisely disciplined
trade. I can't control the direction of the market or the direction of
a stock so if my initial hypothesis of the direction is wrong, I am best
served by getting out quickly before the loss mounts too much..
I know I can't or won't do everything right every time. Sometimes I
am imperfect. (I find that hard to believe, but it's true). Recognizing
the imperfection and knowing I may err in some trades, I should take
great solace in my overall success. All of this to say I think I whined
way too much about the losing trade last week. The positives are
important. In that trade, I made a good entry, I exited when the stock
gapped down through support, I adhered to a money management plan and
I'm still in the game. This week was better. I should probably bite my
tongue for even thinking this, but it is starting to look like the
markets might (emphasize "might") be ready for a little upswing into the
fall. August, September, and October are traditionally thought to be
potentially weak months. If so, there could be some great buying
opportunities ahead. That is true even if the bullishness the past week
is a return to an uptrend.
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
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