Thursday, February 15, 2007

Arghh

Yet another fiasco on the share market today. Why the hell did I even get back in. What on earth possessed me to buy back in- when I was already totally out in the black last week????

I know. I forgot about the trade and worried about the money. This might seem a bit strange to hear. But in trading you worry about the trade - the charts and act accordingly - the price is secondary.

You can't go into a trade and say to yourself- I'm going to sell when I make $5000 or $1000... hey its good to set targets. But the most important thing that should preoccupy your mind is the chart and the direction of the trade.

If you're in doubt- get OUT. Sell.

Instead, I started focusing on the cash... how much money I would lose if I sold. And when the trade went sour- I hesistated and "hoped" that the trade would improve. This is share trading anymore - its just gambling. Hopeing that my luck would improve... hoping for a favorable company announcement or broker's report.

To put the cream on an awful day. I bought into KS Engineering. Then my broker told me that it was after SunPower... I looked at Sunpower, and yawned. 27 - 28... It didn't dawn on me that if SunPower was the target for KS, it would be good to - at least - put down some money into SunPower.

Then I went for lunch... well not really lunch- I went to meet an Uncle. He talked and then he spent 20 minutes smsing his friend whilst I looked on... on boredom. By the time I got back home SunPower had climbed to 30. I looked on stupidly. By the close of the day it had hit 37.

What was really bad- was that I lost my composure- my cool - my chi... it really freaked me out. I couldn't get over it for many hours.

But that's the danger- if I allow these sort of setback to screw with my brain- then I am bound to screw up my next trade because I am no longer thinking in a rational and coherent manner.

And that really sums up the whole week- I just lost it and I allowed the price to get to me. I did not install any stop losses- I just thought good thoughts.

Rule 1 of a trader.

1. Protect your capital. Don't squander it on foolish ill-thought trades.
2. Protect your profits.
3. At all times- seek to minimize your risk profile- esp. in a bear market or in a volatile market - or when the market is way overbought.
4. Have stop -losses. You need to protect your capital. Get out of a trade if its going badly.

I think I;m sitting on paper losses totally $10,000 now, maybe more. I feel totally shit. I now have the unpleasant task of eyeing balling the charts - and trying to exit them.

Still I have only a small percentage of my capital riding on the stocks at the moment. I should be able to ride out the storm.

Oh god. That's not the point though. I should have minimized my losses on the day itself. Why didn't I learn my lesson?

But taking a loss is very very hard. And that is well traders- good ones- keep their losses to a minimum and act swiftly on their stop losses.

Now I need to avoid the temptation of averaging down which can be like throwing more money out of the window.

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