We as humans love stories and our brains are great at putting pieces together and following logical sequences. That doesn’t mean they are worthy of investment or for trading.
“Stories” as they relate to investment themes are a bad for of entertainment. When you marry this logic with fear or greed, you can put yourself in a very unenvious situation very quickly by losing a great deal of money quickly or worse.
Looking for a promise in a world of prevarication. Why would you need to be alerted to an idea from mass media instead of doing your own research? Who’s accountable for the gains and losses?
Developing Your Own Trading Process
You must think along the lines of being your own person – that’s how you have a principle-centric life. You are in control and own all your gains and losses. Picking ideas from the media isn’t a trading process anymore than chart reading is.
And following an on-air personality and trading alongside them is no different than betting that King Charles is going to hit his next shot or Houston Astros’ Center Fielder and World Series MVP George Springer is going to hit another Home Run. Go look up the Hot Hand Fallacy.
Ask any real trader and they’ll agree with me: traders live in a paradigm of personal responsibility.
In the end, you need to own your own process. If you don’t have one, don’t trade until you do. You cannot delegate the key aspects of a trading system to someone else nor make key decisions based upon someone else’s philosophy.
Here’s what you’re missing if you are sourcing your trade ideas from TV or from the charts you see published via the Twitterati:
1) entry price
2) exit price
3) position size & risk management
4) stage of trend (if there is a trend)
…”and the grandaddy of them all…”
5) correlation risk to what else is in your portfolio
We can add another once we add you to the equation:
6) the best way to express the risk for your psychological makeup
That means, do you rely on the the equity, options, or futures markets to effect the trade? Which is most suitable for you and your emotional constitution, years to retirement, and tolerance for risk.
Develop your own fundamental ideas from your daily life. That is something you can witness by yourself. Then, marry up what you see for yourself with the direction of the trend.
If there is no trend, you might be wrong or you might be early to the trade. If the trend has begun, that’s not a bad thing – there might be much more left to it.
Don’t be turned off from this situation as most trend followers are “fast followers” and adapters than inventors, so to speak.
More Great Trading Articles & Podcasts
How to Scour Data for the Best Trades
Three Components of a Trading System
Trading Systems Do Not Remove Emotion from Trading
Two Free Offers
Tony Saliba’s Options Playbook
Inner Voice of Trading Audiobook
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