My biggest lesson...

Discussion in 'Trading' started by michaelscott, Mar 25, 2007.

  1. On Friday night, I went out in NYC and stayed over my friend's apartment. My friend is a successful man who works for a large company and holds an MBA from a top school (which he didnt pay for, his company did).

    On Saturday morning, we go out to get something to eat. There are many places to eat along the street and I quickly went into one place. My friend walked in, shook his head and then we headed back to the street. We walked around for what seemed like a half-hour. I became impatient and threw obvious hints that I just wanted to go into anyplace. Instead, he smiled as we continued to walk around in the maze of streets.

    Then we came upon one very nice restaurant with a good atmosphere. The food was good and the prices were reasonable. The experience was memorable and a far cry from the first place that I had hastily went into. In fact, the first place was dirty and the staff unfriendly.

    He looked at me as we sat down and told me that this is how he handles his affairs when he works. There are always many opportunities out there, but he is willing to wait for the right one before he jumps into anything.

    This has been the biggest mistake in my investing/trading. In the past, I've been impatient wanting to make money now and feeling that I should be trading all the time. For example, I knew there was a correction coming at the start of the year. I should have just waited until it came and then jumped in with my cash after.

    Another example is 2006. A person that went to cash and patiently waited for the correction and the bottoming would have made more cash then the ones who attempted to trade from the start of 2006 until the end. I can only imagine that quite a few traders were shaken out during that May 2006 correction.

    On The Kirk Report, I saw how Kirk only made a 16% return in 2006. Kirk seems like a knowledgable, educated man with over a decade of experience in the market. However, what if he just went on vacation at the start of 2006 and then came in the last two quarters?

    My biggest lesson is one of patience. Patiently waiting for the right opportunities and not trading all the time. There are some people on here who insist that in order to be a good trader you must be able to trade through any market at all times everyday. I dont believe this to be the case. The best traders, in my opinion, are those that patiently wait for the right opportunities, even if it takes months of sitting on the sidelines.

    In my view, its difficult to predict exactly when a market or a stock will correct. However, its much easier to see when it will probably bottom through technical analysis.

    I made a mistake this year in not patiently waiting for the right moments. I feel now that we have almost completed the handle of the cup/handle that has formed on the charts and soon we will be breaking out to fresh new highs. There wont be another correction this year, maybe in 2008. The returns I will have this year will be good, but not as good as if I waited for stocks to go on sale.
  2. Excellent post. Without patience (to wait for trading signal, whatever you use) and discipline (to execute only the signals, and with consistency), I doubt one could succeed at this job.

    I probably talk about patience and discipline everyday as they are difficult to master with so much media "noise" and vested interests, so thanks for posting one very important aspect of trading that many eschew for "sexy" systems and indicators!! And a good story too...
  3. doublea



    You seem to mention cup and handle formation. In classic TA, doesn't the handle form near the resistance.

    I think it is not valid C&H formation unless SP goes to 1460 first and consolidates near the resistance for 3-4 weeks. Then the break-out will be very strong.
  4. Yes, Michael you are part of the "Now" generation. Everything now.... fast food (ie your story), fast cars, fast wars (ie Iraq Shock and Awe), and fast trading...the list goes on.

    Everything Now, Now, Now.

    Good luck in your trading Now that you have realized that some patience is a good thing in all endevors.

    Now what are we waiting for..........
  5. The Cup-handle formation is a rough thesis.

    I figured that when the indexes hit their pre-correction highs then they will either do one of two things. Come right back down again or break-out past the resistance.

    My bet is that it will take out the resistance. There are a few other reasons as to why I believe this possibility. Those factors being the following which I have also mentioned on other threads:

    1. ISEE sentiment indicator 10 day moving average. The ISEE has only been this low on two other occasions since 2002 (the first time they started recording sentiment readings). Each time the indicator has been at this low point then the indexes experienced breakouts. The notable examples are in late 2002 and September 2006.

    2. Record high put/call ratios- Options buyers are almost always wrong. During the 2000 crash, everyone remained optimistic until the ship actually sunk buying more calls then puts. The only time the 10 day EMA $CPC put/call ratio went above 1 was during September 11th and then it quickly went back down. My belief is that everyone was thinking 2000-2001 would be like 1998 where a momentary dip would create a buying opportunity. This thesis proved to be wrong.

    This time around everyone is buying more puts then calls thinking that this will be a repeat of the year 2000.

  6. On man's cup-with-a-fat-handle is another man's double top, haha!
  7. Im in my 30s and my generation is no longer the newest model.

    The newest generation of people in the NYC area seems to be those with foreign accents and can speak a second language. My generation has been replaced.

    I was in a bar on Friday night and I noticed that everyone in their 20s seemed to be a foreigner. I soon learned another valuable lesson. When I placed 4 20s in my coat pocket, I noticed by the end of the night they were gone. I was pick-pocketed and probably by one of the foreigners.

  8. Oh, I was with you until that last line.

    Somthing else worth mentioning, I have seen an increasing number of pattern failures in the last 45 days; specifically the proverbial cup w/handle. This tug-of-war is not without casualities- the impatient and the unprepared.

    The main points of the op are justified and a lesson /reminder to all.
  9. "I've been impatient wanting to make money now and feeling that I should be trading all the time."

    Say for example, your goal for the year is to double your account (or x%). IF you achieved this goal in the month of January, then what? The goal has been met, take the rest of the year off. But it is not human nature, you feel you must be trading all the time much like a regular job. Now what? You set a new goal and hope to double it again. Tough call.

    Really, probably everyone has to learn patience and to wait whether, they day trade or long term for the right set up.
  10. Michael.... I made more money trading the correction rather then waiting for a supposed bottom to buy.

    You can make money when the markets go down....
    #10     Mar 25, 2007