Trading introspection

It's a fine line, sticking to your trading rules vs. taking a risk. There are several outside influences that can have an impact on your "split second" decision making process... especially when you have money on the line. Influences like trading with scared money, lack of focus, and Covestor... to name a few.

I'll explain, as it applies to me, how each of the above affects my daily trading...

Trading with scared money - I first heard these words while listening to a radio interview (found HERE) that Muddy did. And I've written about this topic on several occasions too. These words are invaluable... especially to new traders with small accounts. NOTE: I insist that you do yourself a favor (if you're a newbie) and listen to this interview. Second, as I'm sure many can relate... a large percentage of us trade with small accounts (ie: less than $25,000) which causes all kinds of muckus!

One example is determining if a trade is going to turn a profit or cause a loss, after you've taken a position. Obviously you want to know this before enter any stock, however this ain't the movies! What if you get stuck in a situation where, what looks like a (huge) loss is actually a wicked profit!? Well if you do two things - go against your rules (cutting losses) and of course have some friggin patients, you could be driving a brand new Ferrari! This and much more could be yours if your sanity (and small account) can stand it! Confused? Me too!!

I've entered DHI several times over the past couple of days... with a mental (profitable) exit in mind... however because I'm taking large positions (relative to my account size) I'm suddenly trading with scared money, which is causing me to exit these plays within cents of when the mofo starts to gain steam (long or short)! It's frustrating as all hell and expensive, but a great overall learning experience.

The obvious thing to do is take smaller positions... remember my baseball analogy post (here)... yeah, nuff said.

Lack of focus - This speaks for itself, but I know many can relate. My trading is sloppy, at least by my own expectation. I think it's related to my lack of experience. Now, when I trade sloppy due to lack of focus, this is a whole new ballgame...that's plain sabatoge (think Beastie Boys)! Like when you "long" shares of a stock that you really wanted to "short"... this can and has been costly for me, on several occasions.

When you trade, FOCUS is absolutely essential. If you can't focus entirely while trading you probably shouldn't be trading. Of course there are always exceptions to this; common sense applies here.

Covestor - I support the transparency aspect of what Covestor offers (obviously), because I know when I start doing well, I don't want to be questioned if or how I earned it... for that reason it's great. But where I stand in the ranking means b0-diddly to me... (or does it?). After each trading day the first thing that comes into my mind is how that day's trading will affect my Covestor ranking and my chart, which everyone "gauges", how I'm doing. What I should be doing is reflecting on my trades (good and bad) and looking for new plays... ah, there's that damn ego again!

So with this stuff in mind, the question remains - when do you stick to your rules vs. taking a risk when trading with a small account that you're so "desperately" trying increase? Obvious answer for some I'm sure.

Anyhow, my new resistance point is $8k... I've been over it twice... and hovered about $60 away from it quite a bit, but have yet to break, hold, and create support... so as always we shall see...

PS - I'm working on my day-trading-baseball-statistical-design... I'll try and have a rough draft by weeks end (Friday).