It is my conclusion that playing the market is partly an art form, it is not just pure reason. If it were pure reason, then somebody would have figured it out long ago. That’s why I believe every speculator must analyze his own emotions to find out just what stress level he can endure. Every speculator is different, every human psyche is unique, every personality exclusive to an individual. Learn your own emotional limits before attempting to speculate, that is my advice to any one who has ever asked me what makes a successful speculator. If you can’t sleep at night, because of your stock market position than you have gone too far, if this is the case then sell your position down to the sleeping level.
On the other hand, I believe everyone who is intelligent, conscientious and willing to put in the necessary time, can be successful on Wall Street. As long as they realize the market is a business like any other business – they have a good chance to prosper.
I believe that having the discipline to follow your rules is essential. Without specific, clear, and tested rules speculators do not have any real chance of success. Why, because speculators without a plan are like a general without a strategy, and therefore witout an actionable battle plan. Speculators without a single clear plan can only act and react, act and ract, to the “slings and arrowws of stock market misfortune”, until finally they are defeated.
1. Create a clear, concise method that will serve you to find trading ideas. A method consist of simple to implement consecutive steps based on market anomalies. A method should be derived from your trading goals and it always incorporates in itself money management techniques for capital preservation.
2. Use those trading ideas to create a plan of action.
3. A plan of action usually consists of two or more scenarios. For example if X happens, I will go with trading idea A; if Y happens, I will go with trading idea B. We create different scenarious, because we can’t control the market. We forecast what might happen and plan how we will react if certain event or a process happens.
Having a clear method helps you to be consistent and disciplined in finding new trading ideas. Creating a plan helps you to profit from your trading ideas. It assist you to focus on your goals.