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    Friday, April 18, 2008

    Early morning thoughts


    I'll be traveling later today, but wanted to share a few thoughts before the open. We're getting close to a signal to get long SRS and SKF (shorting stocks), so I'll keep an eye out and even delay my travel if necessary.

    I often look back at my trading career from the beginning until now. It's shocking realize that successful trading was much easier than I originally made it out to be. That's not to say it's easy, just that it's easier than most think. I made great progress in my results when I learned HOW to view the task at hand. Reading everything I could get my hands on, it's a definite that I was a victim of information overload. You'll find that the best traders, if you're fortunate enough to know some, will often use the least amount of indicators and other inputs in their trading decisions. They are aware of the news, but don't typically act on headlines. In short, they are not highly excitable, even in this "super-charged" and uncertain environment. We also don't find these "wizards" pecking away at the keyboard all day. Instead, they focus on themselves and making sure that they approach each turn in a consistent manner. The uncertain world of financial markets doesn't intimidate the pro, because he knows that at the end of a series of trades, he will have extracted profits. Losing trades don't upset him/her, but making mistakes in execution ARE cause for alarm.

    New traders would be shocked at how the pros have learned to keep it simple. The more indicators you use, the higher the likelihood that they will never point in the same direction and allow you to take a trade with confidence. It'll confuse and distract the trader from managing themselves.

    It's essential to really understand "why" you trade. Everybody says, "the money", of course. However, if you find yourself watching 80 stock ideas, and 6,000 quotes, you might be trading for excitement. Same if you are uncomfortable or bored when not involved in something. You can trade for action, or for profits, but rarely both if you want success.

    Also understand the difference between trading, investing, and economic analysis. Some great economists couldn't trade their way out of a wet paper bag! Sure, I read a lot and even watch a bit of CNBC. But I always remind myself it's for entertainment and entirely separate of how I'm going to act in the heat of the moment. By and large, most traders would perform better if they didn't allow all the bombardment of inputs to change their actions. Keeping it simple is the best way to stay on track.

     

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