One of the hardest things for a trader to do, during a time such as this, is to do nothing. Assuming we have raised extreme levels of cash and feel comfortable with our last remaining positions, it is incredibly challenging to sit idle waiting things out. For me, it always feels counterproductive and my innate desire is to jump in and attempt to play the action any way I can. Luckily, I have resisted this desire which has kept all four limbs intact however it doesn’t mean the desire disappears completely.
After such a rapid fall, one of the more productive things a trader can do is to start creating a list of stocks to trade in the future. I have been spending my time doing just that and while it is easy for me to relay to people the need to create such a list, it has become clear to me that never have I given any guidance into what one looks for after the carnage.
I truly believe that during times of challenge we have a unique opportunity that unfortunately many miss out on. It may sound silly but the relationship you have with the market and the relationship you have with others are extremely correlated and when you face a challenge, you can either take the time to learn some things about yourself and others or barrel through with your head down, oblivious to the improvements you could be making along the way.
During a time of market chaos, like we have been experiencing this past week, it is very easy for a trader’s emotions to sway with the ticks, keeping them from remaining objective and rationale. For example, while it is fun to be pepped up, as was my goal with last night’s Tape Talk, we can’t fall into the trap of backing up our pep with our hard earned capital compounding the problems. On the other hand, while the environment definitely seems dire, we must avoid the belief that never again will we be able to make money in the markets.
Whether it is this go around or another, it is inevitable that at multiple points during your trading career you will suffer setbacks. Regardless of how seasoned you become as a trader there…