Think in Probabilities
I believe that no one can ever know what will happen in the stock market. As soon as you try to predict what will happen to a stock, you run into trouble because when (not if) you are wrong, you try to fight it so that you can prove that you weren’t wrong. This leads to lots of mistakes, which is something that I have personally experienced.
The alternative approach is to accept that it’s impossible to know the future. If I enter a trade, it’s not because I believe that this particular trade is going to make a profit. Instead, it’s because I believe that this particular reason for entering a trade results in a winning trade some percentage of the time. The big difference with this point of view is that it also recognizes that some percentage of the trades are guaranteed to fail, even if the technique is sound and it is applied properly. There is no reason to fight that.
The biggest thing that has hurt my trading in the past is getting emotional over all of my winners and losers. I have fought lots of losing trades to the bitter end, because I was trying very hard to have no losers. Most of my big losers would have been very small losers if I had stayed unemotional and followed my system.
For a great book about controlling your emotions and trading objectively, read Trading in the Zone.
Bull vs Bear
Most of my investing experience has taken place during bull market conditions so I can’t say that I have actually experienced a bear market, but I don’t feel any reason to identify myself as a bull or a bear. My goal is to trade whatever the market is giving me, be it bullish, bearish, or neither.
Technical vs Fundamental Analysis
I personally think that both approaches are valid. However, technical analysis is much more attractive to me because that is an area where ordinary people can compete with professionals. All the information necessary to analyze a trade is right there in the charts. I also think that given the amount of money I have to work with, I can do much more with actively doing short-term trades than investing in a stock for the long term.
Short Term vs Long Term
This website is all about my active trading account, so it will be about my short term trades. I also have a 401K that’s invested in index funds and is very long term. But for my active trading, I tend to do trades that last anywhere between a few days and a few weeks. I don’t day trade and I generally don’t hold anything longer than a month.
