To cut through the noise, you spend all waking hours reading blogs, anticipating the next Twitter message, and setting up your DVR to record the latest episode of Fast Money. Do you even sleep?
If this sounds like you then you’re a victim of LFED – .Looking For the Edge Disease.
If there is an appropriate time to admit you have a problem, it’s right now. October will likely prove to be a little bit of everything with some expected moves and many that even the gurus couldn’t have predicted. This is the time to realize that no one has all the answers and the best way to trade is by first understanding what you’re good at and to stick to a strategy. Remember what everyone was saying at the beginning of September? “This is usually the ugliest month in the market… gold is already so high”. Now, we look back at a massively bullish month in the equities market and gold is exploding to new highs more often than I shower. Where was the edge?
Quit looking for all of the edges – ultimately, you’ll only find a very sharp knife.
Take some time before you jump back into trading on Monday and ask yourself what your short-term goals are. Sure, you can read all the news you want concerning QE, the devaluation of the dollar, gold movement, etc.., but which one matters to your trading strategy? For example, if you’re a swing trader, you may only care about a particular stock’s chart reading (support levels, volume, etc). There are a lot of successful traders that only move in and out of the same stocks over and over again depending on how they are behaving on the charts. Is this the right style for you?
Maybe you’re a scalper just focusing on intraday volume moves and momo plays. Stick to it. Jump in and jump out.
October is going to be a mess and if you try to put yourself ahead of the market instead of what the market gives you, you could get nailed. Investing and trading are two different things and make sure you separate you strategies accordingly. Don’t guess. Don’t get talked into things. Don’t buy gold and hold because you saw it in a video. Trade your strategy and set your stops. Man, oh, man. Not being dedicated to stops is the fastest way to depleting your portfolio. And as John Welsh says, “Why everyone needs a win rate of 100% is complete bullshit.“ He points out that there is nothing wrong with a 50% win rate because it’s all about cutting your losses.
Organize, relax, take some clutter off of your desk, clean up your stock scans, and reduce the noise. Prepare yourself for Monday. Maybe that means finding 10 stocks that are technically setup for a move. Monday’s work is to only watch those stocks and play the one that shows movement. Maybe the play is to do nothing because the 10 sat there. There is nothing wrong with preserving capital. Rinse and repeat.
The noise will be loud this month. The only sound that matters is the clicking of your keyboard on buy/sell orders. Make them based on your rules and ride the wave and sell the dive. You’ll always have LFED, but keep it under control and when it gets too loud, step away.
See you Monday.