2) Position Sizing – Trading smaller when markets are moving more means that one or two losing trades won’t knock you out for the day or the week. The successful traders tell me they’re making plenty of money with smaller size simply because we’re moving triple digits in the Dow just about every day.
3) Resilience – When you’re wrong in these markets, you can really be wrong. My first trade yesterday lost over 20 S&P points; I wound up the day solidly in the green. By managing risk, you also manage emotions and can stay in the game. The successful traders are in there, making trades. They get off the canvas when they’re wrong and they play defense, even as they look for opportunity.
4) Minimizing Distractions – One thing I noticed is that the successful traders in this environment have taken active measures to protect their personal finances. The less successful ones have been distracted by losses they’re incurring outside of trading. It is difficult to focus on trading if you’re worried about unemployment or loss of savings; addressing personal security helps maximize focus during trading.
5) Self-Maintenance – It’s easy to get run down following markets through the day, every day, and then tracking them overnight and overseas. One troubled trader told me he was living, eating, and breathing trading. That is a risk factor for burnout, lessened concentration, and bad decision making. The successful traders aren’t afraid to step away from the screens; once again, they know opportunity is not going to go away.
I’m finding that execution is the better part of success in these times. If you have a good idea, but the timing of your entry is wrong or your position is too large, you’re likely to get stopped out at the worst conceivable time. By waiting for markets to put in a seeming high or low, waiting for a bounce or pullback that can’t make a new price extreme, and *then* getting into a position, you can minimize the heat you take on trades. That, I’m finding, is half the battle.
