Wednesday, January 13, 2010

Three Questions:

Did I trade well today?
What did I learn about myself?
What did I learn about the markets?

Today was a down day and I made an egregious mistakes by selling part of a large position because I was nervous.  I did not sell all of it.  I was overweighted so it was a relief to get rid of some it.  The stock rebounded and I locked in a big loss at the bottom.  I then regained my composure.  I bought several downtrending names because I felt they were too cheap.  At the end of the day, a big loss ended up being a smaller loss.  The stocks I follow were out of favor.  Meanwhile, all the indexes were up, adding a sense of being in the wrong names.

I learned that I still need to work on my emotions on down days.  This is a marathon, not a sprint.  My portfolio is up -- outperforming all major indexes for the year -- despite two down days in a row.  I need to accept these consolidation days.  I'd rather be up 6 days in a row huge then down 2 then small gains 8 days in a row for a smaller overall gain.  I anticipated the drawdown anyway... I just was extremely uncomfortable anyway.  What's the point?  My targets on many names are far away.  None the stock had specifically negative news.  Today was a normal day.  I was reminded of the importance of focusing on monthly performance and not getting caught up in the day to day movement.  Otherwise, I am just trading like a noob.

I learned the markets are very much focused on daily performance... the markets are quick to overreact to the downside as fear is a strong motivator.  I learned value names rarely perform with the indexes -- they march to their own drummer.

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