My Most Valuable Trading Lesson

The following trading lesson is the shortest one I’ve every written. It doesn’t contain any charts, patterns, systems or money management techniques. However, for me, it was the most valuable revelation for my personal trading.

I began writing my book on swing trading a few months after my first child was born. She was and is a wonderful child but was very colicky in the first few months. During this time, I found myself awakened numerous times throughout the night. Often, I found it difficult, if not impossible, to get back to sleep. In fact, I’d say that the majority of the book was written between midnight and 4 a.m.

Obviously, the lack of sleep began to take its toll. Trying to keep up with my personal trading, my TradingMarket commentaries and my responsibilities with the hedge fund began to wear on me. I knew that something had to go. Therefore, I decided to scale back on my personal trading. This wasn’t a difficult decision for me because the lack of focus seemed to be creating a string of losses anyway.

What happened next was the most valuable trading lesson for me, ever. Not being a participant, I found myself observing the markets very objectively. I saw stocks, sectors, indices all set up. Further, I saw market timing signals beginning to kick in. I reached a point where I simply couldn’t stand it anymore. I stepped in and was immediately rewarded with nice profits. I got too busy to actively manage the positions, so I let trailing stops take me out. To my surprise, I ended up staying with the positions longer and was able to ride out larger moves, because I wasn’t trying to micromanage the trades.

I once again focused on all the tasks I was juggling until finally, I couldn’t stand it anymore. Sectors, indices, stocks and timing signals were all there. I placed my trades and was, once again, immediately rewarded with profits. I began to repeat the above process over and over again. It reminded me of the line in Market Wizards where a trader stated that he simply waited until there was money lying in the corner and then walked over and picked it up.

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