Sunday, November 4, 2018

Why Am I Not Consistent In My Trading?

Market Recap

October was a pretty dismal month for the stock market as it fell 6.9%, the worst month since September 2011 when it fell 7.2%.  If you believe in history repeating itself it may be interesting to note that the following month (October 2011) the stock market gained 10.8%, the best month for the stock market in 10 years.  I only mention this as I believe it does have some historical significance, but I do not expect the market to rally that much heading into the end of the year.  However, last week we did see three straight daily gains of at least 1%, the first such stretch in more than two years.

I do believe this little bump was caused by the positive reports coming out of Washington relating to the China trade dispute and the positive earnings reported by the main S&P 500 companies. I believe the jobs report will help sustain it, but I believe any major move in the market will not take place until after the mid-term elections on Tuesday.

Here are some things we need to keep in the back of our mind as we move forward into November:
  • The earnings season is winding down as close to 75% of the S&P 500 has reported results.
  • It's a bit too early to believe that this latest round of volatility has fully passed, but based on my analysis stated above, I continue to believe that that this is a temporary correction and not the start of a bear market. The market needs these healthy corrections.  
  • The Spotlight continues to be on the trade tensions with China.  I believe any major announcements in this area will be enough to give the market significant short-term volatility.

Profit Calendar

Due to popular demand I will reinstate my profit calendar.  I suspended it early this summer because I found myself trying to hit weekly goals and forcing trades, which is detrimental to growing small accounts.  I believe I am beyond that again so we will see how it goes.

Weekly Specials

You will need to go to this link to see the specials being offered this week:

Finishing The 4th Quarter Strong!
  • My beloved gamecocks were down going into the 4th quarter.  The defense stepped up in the 4th, made some key stops that they had not been able to do all game, and we brought it home.  The truth is Ole Miss outplayed us on every front but that 4th quarter got us the W
  • Auburn used a strong 4th quarter to come from behind and take out Texas A&M
  • Washington St.  who is ranked in the top 10, had to finish the 4th quarter strong to get past Cal
  • West Virginia really had a strong 4th quarter to come back and take out Texas

I could give you many more, but I also know not all teams that won finished strong, but those others started the 1st quarter strong, which is something we will talk about later in the next month.  The point I am making here, or should I say reiterating, is finishing the 4th quarter strong is imperative.  It also sets you up to start that 1st quarter strong.  This is our goal for the next 2 months.  We need a strong finish to 2018 and an even stronger start to 2019.

Rollin' With Ed

The questions I fielded this week in my episode of “Rollin’ With Ed, is; Why Can’t I be consistent in the market?  Why is it so hard to be consistent in the market?  I mean I have the strategies.  I’ve put in the screen time.  But I am still struggling to be consistent.

The bottom line is this, the stock market is random.  Trying to predict what’s going to happen with a stock next without truly understanding the context of the market is like a heads or tails coin flip.  You would be relying on luck at that point.  That is what most new traders do.  They are not willing to be patient and wait for the setups, which is a direct result of not taking the time to develop the proper foundation.  When you see me lose most of the time it is because I anticipated a move.  When I win, I would have waited for the setup and the perfect opportunity to enter.

You do, however need a certain degree of luck.  You see, we have our strategy, we have put in the time to vet the stocks we have on watch so that we have the best candidates, but as you guys who are in the community every day have seen, you must choose the right stock from your watchlist.  I know it can be frustrating, but we must revel in the fact that we have the movers on our watchlist.  Not bad considering there are over 7000 stocks in the market.

How do we improve our consistency in the market?
  • Have a process that we use every morning to prepare mentally and to locate and vet each stock that we put on our watchlist
  • Fully plan out each trade for every stock on your watchlist
  •  Once the market opens, focus on executing your trade plan, with an emphasis on nailing the entry.  The entry is everything. 
  • Reflect on your trades, especially the losing ones.
    •  Reflection is a very, very powerful tool that too few people use 
    • The most successful traders have a process to reflect on their losers and learn from them, which is why they continue to get better before your very eyes. 
The bottom line is that we are all human beings, therefore we will never be perfect, or will we have the ability to eliminate our biases.  Our goal here is not to be perfect in making money from every trade, but to perfect our ability to develop and execute our trade plans.  In that we will need to find balance, understanding that we will make mistakes, but feel confident because we have a process that allows us to learn from and correct those mistakes.  In this process, we will find true learning and consistency. 

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