One reason I decided to spend so much time in Spain is that I needed some time and space away from my normal life to think. I have come to a crossroads in my life, and I have to choose which way to go. This is a process I have learned over many years of moving through my days. To get through the process, I need time and space, which I have here in Spain. When I have that, I can initiate the process and then act accordingly.
The interesting thing for me, though, is there are no rules regarding the process of choosing. I simply look to what I know about me, about where I want to go, and I define my desired outcome. Having these in place allows me act, to choose the steps necessary to get where I want to go, to achieve my desired outcome. Although outlined, the process is not clearly defined. It is amorphous, intangble, and wholly dependent on my intuitive sense, my innate understanding of how I think, how I make choices, how I get to where I want to go.
It might seem the above is out of place, as I have yet to mention the market, which is odd for me, since I mention the market 99.5% of the time I write this column. Yet, in the words above, one can find a connection. One can see the when trading or investing, the same is true. Each trade, each action is a crossroads, a point at which we must decide which way to go. Some utilize formulas or charts to decide; others simply use what they know to decide. If one is good at the latter, meaning one is successful, then it could also mean they are highly experienced, or, at a minimum, in touch with their intuition. They rely on what they know to choose, and this brings me to a question from a reader …
I need to know about how when and when to set stops, trailing stops,and would it ever be better to set a mental stop, act on that mental stop so the market doesn’t blow through it.
I have addressed this question many times, but this reader frames it in such a way that my opening paragraphs answer the question. One can simply define the stops based on a formula, such as 3% on the downside. This depends, of course, depends on your tolerance for loss — how much can you afford to lose on a trade? On the other hand, one can rely on what what knows about the overall market, the specific market, the price-action, and his or her trading abilities. One can turn to his or her experience, to his or her intuition to define the stops. As to not having a stop in place, relying on a quick choice, I would not recommend that at all. Yes, one can change the stop based on the market action and his or her intuition, but one should ALWAYS have a stop in place.
Trade in the day; invest in your life …
