What Have You Been Doing? -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
This article is the first in a series of three where I will
raise the questions of where have you been with your trading, where
would you like to be, and what are you willing to do to become a
better trader.
In recent articles, we have looked at some issues relating to
risk and to some of the psychological factors involved in trading. We
have seen a market that crashed and we have seen a sharp rally. I
find it interesting that I was receiving quite a large number of
inquiries about my coaching sessions as the market was falling, but
not nearly as many during the rise. The calls were often from
prospective new clients who reported large losses and were
looking for ways to stop the bleeding and to attempt to regain lost
ground. Sadly, steep losses had already occurred before help
was sought. It seems clear that less help is sought as markets move
up, but one wonders whether that is a symptom of the old condition of
confusing brains with a bull market.
The fact that we have seen an upturn in the market following the
March lows certainly does not mean that it can't turn back down. The
question is whether the trader knows how to protect himself in the
event of another decline or whether he has already forgotten his
recent pain. Hopefully, it is the former and the trader has taken
steps to understand ways to cut losses, hedge positions, or even
insure a portfolio.
No matter who we may be or where we are in our trading, I would
suggest it is a valuable exercise to take a personal inventory about
our approach to trading and make an evaluation of how well or poorly
it has served us. Some of the folks to whom I have spoken told me
that they just threw away their account statements unopened because
they knew they would be bad. While I can sympathize with their
feelings, I don't see how this "ostrich approach" can be helpful. In
a sharply declining market, that approach does nothing to cut losses
nor does it assist in learning ways to profit from downward moves. Others
have simply pulled out of the market either because they have
abandoned hope or to cut losses and await the next bullish move.
Finally, a small few have had great success.
Now is as good a time as any to recognize where you fall on the
spectrum of trading. Did you throw away your statements or did you
have exit strategies in place that saved the bacon? Did you know what
to do and when to do it or did you just hang on for dear life hoping
"it'll come back?" At this point, whatever you did or didn't do can
teach important lessons for the future.
Self-evaluation may help avoid costly errors in the future and
may help even the most successful improve their trading. I would
suggest that each of us look at positions we have entered and/or
exited in the last year and a half and try to recognize why we entered
a play, ascertain whether we had planned the trade before we entered
it and if so whether we followed our plan, and determine what strategy
were we attempting to use and ask ourselves whether we actually
followed through with our strategy. Did we succumb to the "little
voice in our heads" saying something like: "I'll just let it go down
another 50 cents before I get out." Did we get out then or did we let
it go even farther down? We need to analyze why we made those
decisions. Was it a fear of losing? Did we give up because we just
didn't know what to do? Did we stay in positions because we consider
ourselves to be buy and hold investors? Precisely what led to our
decisions or indecisions.
In trading, as in many things in life, it is important in
determining where we are going to know where we have been and what
influenced or controlled our decisions. The introspection can be
extremely helpful in heading us or keeping us in the right direction.
If I can understand my behavior with respect to a trade or to my
trading in general, I am armed with ammunition that can help me become
better than I have been in the past. Failure to come to such an
understanding can easily result in repeating the same performance. As
has been said, "The definition of insanity is repeating the same thing
over and over and expecting a different result."
Good Trading!
Bill Kraft
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Here's a look at a trade Bill is currently working on:
SPDR Gold Shares (GLD)
Gold prices have been falling since February and GLD is
now trading in an area of support. It looks as though it may be
getting ready to make a double bottom and if it does that, I will be
considering some in-the-money LEAPS calls.
Good Trading!
Bill Kraft
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Trend Trader -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Here's a look at a trade Bill is currently working on:
Tsakos Energy Navigation Ltd. (TNP)
Trend Trader added another winner this week with a 2.5%
gain for a one week trade that closed Wednesday. The stock has
retreated to support and looks like it could provide a re-entry early
next week.
Good Trading!
Bill Kraft
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$10 Trader -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Here's a look at a trade Bill is currently working on:
Medical Properties Trust Inc. (MPW)
This healthcare REIT has been creeping back up after a
long downtrend. It began an uptrend in March and recently broke above
some resistance around $4. It is currently dealing with the $5 level
and I will look for a possible entry either on a retreat to the
uptrend accompanied by a bounce or on a break above $5. There seems to
be some resistance at the $6 and $7 levels as well so I look for the
possibility of this moving to the next dollar level, perhaps basing
and then moving on.
Good Trading!
Bill Kraft
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