Author: Ivanhoff

In one of my favorite movies, a guy is trying an unconventional way to escape from the boringness of his ordinary life. He has an eye-opening experience, he has his fun, but in the end, realizes that saying Yes to everything is not the ultimate secret to happiness. There were way too many Yes Men and Women in the US Banking and Mortgage Industries; in the government too. We had our fun, we have had our bubbles. “Yes” could be a powerful word, but often “No” is a better alternative.

Apple is a huge success story because it learned that it can’t be everything for everyone.

That ability to express by omission holds a central place in Jobs’s management philosophy. As he told Fortune magazine in 2008, he’s as proud of the things Apple hasn’t done as the things it has done. “The great consumer electronics companies of the past had thousands of products,” he said. “We tend to focus much more. People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas.” (Jobs sometimes says this even more bluntly: Nike CEO Mark Parker likes to recount the advice Jobs gave him shortly after Parker’s promotion to the top spot: “You make some of the best products in the world — but you also make a lot of crap. Get rid of the crappy stuff.”)

The most successful market participants are specialists. They know how to do one thing exceptionally well – one time frame, one asset class, one approach, one setup.

So how to find the balance between the Yes man in you, who wants to experience the beauty of the world around him and the No Man, who needs to focus in order to achieve something of significance. Well, you have to learn to distinguish your life as a trader from your life as a human being.

Say Yes to trying new things in your life; embrace the diversity and the variety. But when it comes to trading, be a creature of habit. Say No to investing/trading setups you don’t understand and therefore have no edge at.

In the VC industry, experienced investors often claim that ideas themselves are worthless without proper execution. The same is true for the stock market. Having a well thought out equity selection approach is a necessary, but insufficient condition for achieving consistent profitability. Finding new trading ideas is not enough. There is no purpose of having four-five stocks in your watch list if you don’t have a clear plan how to profit from them.

When are you going to enter: on a breakout or in anticipation? Can you afford to watch the stock in real time and do you have the emotional capability to enter when it breaks out? I like to enter in an anticipation of a breakout.

How much are you going to risk? Where are you going to put your stop? I like to enter my stop at the market order immediately after I open a trade. If I am stopped, I accept that as part of the game. I was either early or wrong about the direction. Mental stops don’t work with me as sometimes I can’t watch my stocks in real time or if I am watching, I might decide to give it a bit more room and lose more. I just know myself. Barring another flash crash, this works beautifully for me. It might work for you too.

Where are you going to exit and why?

– My position is automatically closed when my stop is hit, no questions asked;

– I will automatically sell 1/2 when the achieved gain is 3 times the risked amount; I will trail the rest;

– If my stock doesn’t move in the next 2-3 days after I entered, I sell. I have no intention to be in stocks that don’t perform.