Sunday, February 7, 2010

Hope is for the Unprepared

Sometimes you hope the markets will go up or a stock will do this or that.

Hope is for the unprepared.

If you're trading for a living, you can only control your own actions.  So if a stock moves down, where do you plan to limit losses?  What signals will indicate the environment has shifted?

When will you switch from offense to defense?

A trader must always be prepared to go over the scenarios and diligently watch for the signs of shift in investor confidence.  A trader must always have an actionable game plan that covers every scenario.

If not, the trader will inevitably start hoping -- a sure sign that one's strategy is closer to failure than realized.

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