Trading to Win? Break Those Bad Habits

We are all creatures of habit, and with so much going around us in our lives at the speed of light we tend to fall into some set routines. That is often the case for us as option traders, and while some routines are efficient and allow us to make quick decisions, others can be quite harmful and cause some dangerous missteps.  Many of us are unaware of these habits, they become instinctual. 

When that occurs the bad habits become tough to break. Our habitual characteristics are different but when it comes to making money in markets many of them are similar.  Let's crack open the egg here and see if there are a few habits we can change to help make us better traders and investors.

Bad Habit 1:  Averaging down on an investment is a habit we are taught from the beginning. 

'Buy the dips' is what we are told.  From an investment standpoint that is sage advice, but for traders - especially option traders - that can be terrifying.  Understand how money flows into markets and where it is coming from.  Institutional investors make up 80% or more of the action, and while high frequency traders get all the headlines, they are a minority in the game of dollars.  Recognize when momentum takes hold, as we identify markets as a bidding machine, not one to take advantage of falling prices.  Consider this:  the markets are more like Ebay (auction), and not like Walmart (falling prices).  Stocks have value, and will go to the highest bidder at all times (if there is one).

Bad Habit 2:  Going 'All In'

We talk about this one often in our chat room.  Putting all of your eggs in one basket is not just impractical but it's just plain stupid.  Now, some have their own definition of what 'all in' means, but for our intent here it is investing all dollars.  It is just simply foolish to do this.  Not having any cash at the ready for new opportunities will hamstring you when ideas come across your screen.  Let's also remember the stock market is not risk free nor is it immune to volatility.  While the current volatility index is low (indicating low probability of big moves), this is a dynamic vehicle and any whiff of bad news will leave nothing but sellers to deliver some pain to buy and holders.  ALWAYS have some cash ready, so that means sizing your trades correctly.

Bad Habit 3:  'Set it, and Forget it'

Oh, we wish making money in markets were easy.  In the old days it was easy to buy and hold and leave all alone.  That is how our parents and grandparents built wealth.  But today if you forget what you have working you run the risk of ruin.  Back in the day this was not the case, and we were told a rule by our elders to just buy companies and forget about looking/trading them for the next 30 plus years.   That used to work, when the country was growing at a strong pace after World War II Well, I'm here to tell you the time has passed on that rule.  Buy and hold can turn into hope and pray! 

Don't believe me?  Just ask anyone who held stocks through the financial crisis, and how stressed someone holding Bank of America stock was when it plummeted from 40 all the way to 3 bucks!  Always understand what you own, how it can be affected by government policies and the economy.  Awareness and perception are key to financial success - don't be complacent.

We'll cover a few more bad habits to break in a couple of weeks.  Until then, if you need to make some changes in your style - do it!

18 Comments

Join In on this conversation, post a comment below.
Visitor - anjilo smith: Quicken Tech Support Phone Number Quicken Support Number Quicken Support Phone Number Quicken Tech Support Number Quicken Tech Support Phone Number Quicken Technical Support Number Quicken Technical Support Phone Number Quicken Customer Support Number Quicken Customer Support Phone Number Quicken Customer Service Number Quicken Customer Service Phone Number Quicken Deluxe Support Number Quicken Deluxe Support Phone Number Quicken Deluxe Tech Support Number Quicken Deluxe Tech Support Phone Number Quicken Deluxe Technical Support Number Quicken Deluxe Technical Support Phone Number Quicken Premier Support Number Quicken Premier Support Phone Number Quicken Premier Tech Support Number Quicken Premier Tech Support Phone Number Quicken Premier Technical Support Number Quicken Premier Technical Support Phone Number Quicken Home & Business Support Number Quicken Home & Business Support Phone Number Quicken Home & Business Tech Support Number Quicken Home & Business Tech Support Phone Number Quicken Home & Business Technical Support Number Quicken Home & Business Technical Support Phone Number Quicken Rental & Property Support Number Quicken Rental & Property Support Phone Number Quicken Rental & Property Tech Support Number Quicken Rental & Property Tech Support Phone Number Quicken Rental & Property Technical Support Number Quicken Rental & Property Technical Support Phone Number Quicken Starter Edition Support Number Quicken Starter Edition Phone Number Quicken Starter Edition Tech Support Number Quicken Starter Editionr Tech Support Phone Number Quicken Starter Edition Technical Support Number Quicken Starter Edition Technical Support Phone Number
Reply Flag
Visitor - anjilo smith: Quickbooks Support Phone Number Quickbooks Support Number Quickbooks Support Phone Number Quickbooks Tech Support Number Quickbooks Tech Support Phone Number Quickbooks Technical Support Number Quickbooks Technical Support Phone Number Quickbooks Customer Support Number Quickbooks Customer Support Phone Number Quickbooks Customer Service Number Quickbooks Customer Service Phone Number Quickbooks Pro Support Number Quickbooks Pro Support Phone Number Quickbooks Pro Tech Support Number Quickbooks Pro Tech Support Phone Number Quickbooks Pro Technical Support Number Quickbooks Pro Technical Support Phone Number Quickbooks Pro Customer Support Number Quickbooks Pro Customer Support Phone Number Quickbooks Pro Customer Service Number Quickbooks Pro Customer Service Phone Number Quickbooks Payroll Support Number Quickbooks Payroll Support Phone Number Quickbooks Payroll Tech Support Number Quickbooks Payroll Tech Support Phone Number Quickbooks Payroll Technical Support Number Quickbooks Payroll Technical Support Phone Number Quickbooks Payroll Customer Support Number Quickbooks Payroll Customer Support Phone Number Quickbooks Payroll Customer Service Number Quickbooks Payroll Customer Service Phone Number Quickbooks Premier Support Number Quickbooks Premier Support Phone Number Quickbooks Premier Tech Support Number Quickbooks Premier Tech Support Phone Number Quickbooks Premier Technical Support Number Quickbooks Premier Technical Support Phone Number Quickbooks Premier Customer Support Number Quickbooks Premier Customer Support Phone Number Quickbooks Premier Customer Service Number Quickbooks Premier Customer Service Phone Number Quickbooks Enterprise Support Number Quickbooks Enterprise Support Phone Number Quickbooks Enterprise Tech Support Number Quickbooks Enterprise Tech Support Phone Number Quickbooks Enterprise Technical Support Number Quickbooks Enterprise Technical Support Phone Number Quickbooks Enterprise Customer Support Number Quickbooks Enterprise Customer Support Phone Number Quickbooks Enterprise Customer Service Number Quickbooks Enterprise Customer Service Phone Number Quickbooks Error Support Number Quickbooks Error Support Phone Number Quickbooks Error Tech Support Number Quickbooks Error Tech Support Phone Number Quickbooks Error Technical Support Number Quickbooks Error Technical Support Phone Number Quickbooks Error Customer Support Number Quickbooks Error Customer Support Phone Number Quickbooks Error Customer Service Number Quickbooks Error Customer Service Phone Number
Reply Flag
Reply Flag
Visitor - anjilo smith: Quickbooks Tech Support Phone Number Quickbooks Support Number Quickbooks Support Phone Number Quickbooks Tech Support Number Quickbooks Tech Support Phone Number Quickbooks Technical Support Number Quickbooks Technical Support Phone Number Quickbooks Customer Support Number Quickbooks Customer Support Phone Number Quickbooks Customer Service Number Quickbooks Customer Service Phone Number Quickbooks Pro Support Number Quickbooks Pro Support Phone Number Quickbooks Pro Tech Support Number Quickbooks Pro Tech Support Phone Number Quickbooks Pro Technical Support Number Quickbooks Pro Technical Support Phone Number Quickbooks Pro Customer Support Number Quickbooks Pro Customer Support Phone Number Quickbooks Pro Customer Service Number Quickbooks Pro Customer Service Phone Number Quickbooks Payroll Support Number Quickbooks Payroll Support Phone Number Quickbooks Payroll Tech Support Number Quickbooks Payroll Tech Support Phone Number Quickbooks Payroll Technical Support Number Quickbooks Payroll Technical Support Phone Number Quickbooks Payroll Customer Support Number Quickbooks Payroll Customer Support Phone Number Quickbooks Payroll Customer Service Number Quickbooks Payroll Customer Service Phone Number Quickbooks Premier Support Number Quickbooks Premier Support Phone Number Quickbooks Premier Tech Support Number Quickbooks Premier Tech Support Phone Number Quickbooks Premier Technical Support Number Quickbooks Premier Technical Support Phone Number Quickbooks Premier Customer Support Number Quickbooks Premier Customer Support Phone Number Quickbooks Premier Customer Service Number Quickbooks Premier Customer Service Phone Number Quickbooks Enterprise Support Number Quickbooks Enterprise Support Phone Number Quickbooks Enterprise Tech Support Number Quickbooks Enterprise Tech Support Phone Number Quickbooks Enterprise Technical Support Number Quickbooks Enterprise Technical Support Phone Number Quickbooks Enterprise Customer Support Number Quickbooks Enterprise Customer Support Phone Number Quickbooks Enterprise Customer Service Number Quickbooks Enterprise Customer Service Phone Number Quickbooks Error Support Number Quickbooks Error Support Phone Number Quickbooks Error Tech Support Number Quickbooks Error Tech Support Phone Number Quickbooks Error Technical Support Number Quickbooks Error Technical Support Phone Number Quickbooks Error Customer Support Number Quickbooks Error Customer Support Phone Number Quickbooks Error Customer Service Number Quickbooks Error Customer Service Phone Number
Reply Flag
Visitor - Thomas : As an owner for a septic cleaning company, I feel it is important to break bad habits and trade smart and for the long haul
Reply Flag
Visitor - Ayden: We are all creatures of habit... 192.168.0.1 router help
Reply Flag
Tags: