RELAXED FAITH
“After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience
invariably matched mine, that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
Jesse Livermore
This quote by Jesse Livermore is perhaps my favorite trading quote of all time. Absolute truth permeates every sentence. I suggest you read it repeatedly until it is becomes part of your trading DNA.
I would say that successful investing is 1% inspiration (stock picking) and 99% perspiration (handling your emotions). In light of this, once you have 1) selected your stocks, 2) waited patiently until they presented a low risk entry, and 3) visualized how you will react in the future, it is then time to sit back, relax, and become a patient Zen-master trader. As we all know, this is much easier said than done. Daily volatility drives us crazy. How in the world does one cultivate disciplined patience in the chaotic market environment? Have you ever had a stock soar on you within seconds after you sold it? You think to yourself, “If only I had just a little more patience!?” Or similarly, have you ever had one of your stocks soar within hours or days after totally giving up on it emotionally? This has certainly happened to me. This is due to the Law of Indifference. Success in trading has its own time frame and usually comes when we least expect it. Traders are constantly misled by the darkness before the dawn and give up just before something truly spectacular happens.
To cultivate this critically important art of patience, simply step away from the market during market hours. Whenever I decide to go for a long hike, go to the movies, or even more extreme, leave the country, the mental burden of watching every tick of the market is immediately lifted. I find that once I step away from the screen, I am able to focus on the millions of other things in life that are more important than trading.
I was so confident in most of my biggest winners that I simply refused to watch them during the market day. I don’t care how confident I am in a particular position—if I open up Level 2 streaming quotes and watch a stock tick-for-tick throughout the day, undoubtedly, my irrational mind finds an utterly meaningless reason to sell it. It happens every time. The insignificant ticks can drive you crazy. The only way to move beyond this and to let your winners run is to set an electronic or mental stop loss (to be triggered end-of-day or next morning), shut down the computer, and go about living your life.
Even more distracting than watching your own stocks trade from second to second is to watch the compulsive trading action of others. Whether it is in a physical trading room, a virtual trading room, or God forbid, by monitoring thousands of others trading in the “Twitter-verse,” your goal of patience will be thrown out the window. The more you watch other people trade, the more you will want to trade, the more your account will churn, and the less successful you will become. In the world of trading, action is the enemy of success. Like “news,” having hundreds of ideas thrown your way is highly addictive and only serves
to make you less certain in the positions you already have. If you feel the need to actively participate on Twitter or in an online forum, my advice is to do so outside of market hours when you won’t be able to make an immediate transaction. Personally, I try to watch the last half hour of the market day since this is typically the time when smart money enters or exits positions. I then try to perform a majority of my research in the evening. This practice enables me to process new ideas much more rationally.
invariably matched mine, that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.”
Jesse Livermore
This quote by Jesse Livermore is perhaps my favorite trading quote of all time. Absolute truth permeates every sentence. I suggest you read it repeatedly until it is becomes part of your trading DNA.
I would say that successful investing is 1% inspiration (stock picking) and 99% perspiration (handling your emotions). In light of this, once you have 1) selected your stocks, 2) waited patiently until they presented a low risk entry, and 3) visualized how you will react in the future, it is then time to sit back, relax, and become a patient Zen-master trader. As we all know, this is much easier said than done. Daily volatility drives us crazy. How in the world does one cultivate disciplined patience in the chaotic market environment? Have you ever had a stock soar on you within seconds after you sold it? You think to yourself, “If only I had just a little more patience!?” Or similarly, have you ever had one of your stocks soar within hours or days after totally giving up on it emotionally? This has certainly happened to me. This is due to the Law of Indifference. Success in trading has its own time frame and usually comes when we least expect it. Traders are constantly misled by the darkness before the dawn and give up just before something truly spectacular happens.
To cultivate this critically important art of patience, simply step away from the market during market hours. Whenever I decide to go for a long hike, go to the movies, or even more extreme, leave the country, the mental burden of watching every tick of the market is immediately lifted. I find that once I step away from the screen, I am able to focus on the millions of other things in life that are more important than trading.
I was so confident in most of my biggest winners that I simply refused to watch them during the market day. I don’t care how confident I am in a particular position—if I open up Level 2 streaming quotes and watch a stock tick-for-tick throughout the day, undoubtedly, my irrational mind finds an utterly meaningless reason to sell it. It happens every time. The insignificant ticks can drive you crazy. The only way to move beyond this and to let your winners run is to set an electronic or mental stop loss (to be triggered end-of-day or next morning), shut down the computer, and go about living your life.
Even more distracting than watching your own stocks trade from second to second is to watch the compulsive trading action of others. Whether it is in a physical trading room, a virtual trading room, or God forbid, by monitoring thousands of others trading in the “Twitter-verse,” your goal of patience will be thrown out the window. The more you watch other people trade, the more you will want to trade, the more your account will churn, and the less successful you will become. In the world of trading, action is the enemy of success. Like “news,” having hundreds of ideas thrown your way is highly addictive and only serves
to make you less certain in the positions you already have. If you feel the need to actively participate on Twitter or in an online forum, my advice is to do so outside of market hours when you won’t be able to make an immediate transaction. Personally, I try to watch the last half hour of the market day since this is typically the time when smart money enters or exits positions. I then try to perform a majority of my research in the evening. This practice enables me to process new ideas much more rationally.
Post a Comment