What a difference a weekend can make. Last Friday, the blues set in for me and this morning I woke up after a good night’s sleep feeling, well, not blue. The market jumping out to a big gain this Monday morning and my closing out a whopper trade helped push the blues away as well. Actually, the latter is something I want to talk about for just a moment.

The other day, a reader wrote in asking about a trading plan. He said he had read many books and articles about trading, but he still did not have a grip on how to develop a trading plan. This piqued my curiosity, as it seemed implausible, so I did a small amount of research and within five minutes, I had more information on trading plans than I had time to read. Nevertheless, I jumped about a bit just to see what was out there.

As I was scanning through the material, a long-buried memory found its way to the forefront on my thinking. As a child, I remember my parents saying, “Do as I say, not as I do.” That is quite the convenient maxim for a parent, and it appears it has become a convenient maxim for me.

I always tell everyone to have a trading plan, and that is good, but as I was reading about trading plans, one point kept popping up – write the plan down. As those words kept passing in front of my eyes, I could not help thinking that at one time, I wrote my plan down, but now, I don’t even know where it is. Today, every trade I make occurs completely in my head. I do my research, select and confirm my trade with my software, pick my entry point, and then I track the trade to decide when to get out. This actually bothered me, until I remembered something else I wrote about a couple of years ago, when I wrote more about learning how to trade.

When an athlete, an actor, a singer, or any polished craftsman “performs,” they do so in a zone, a place from which they draw knowledge without actually thinking about it. What they need in any part of their process is just there. Years of repeating the process creates this zone. It is the same with trading. Once you repeat the process, say, over five years, you just know what you want to do and how you want to do it. So, here is my point. You might want to jump to just trading without defining a plan on paper, but don’t. Spend the time to work it out, to write it down, to alter it as necessary, to practice sticking to it. I did once, and it helped me get to where I am now – trading on my experience, knowledge, and intuition. So, if you are just beginning, do as I say, not as I do, at least until you get a few hundred trades under your belt …

How about that homebuilder’s data? Ya gotta love that sentiment is higher than it has been in six years. You also have to love the recovery in the housing market in general. As we get closer to ending this year, I am reminded, again, of those who wrote last January that the 2012 housing market would be disastrous. More than a few predicted that foreclosures would overwhelm the market, thus collapsing the fragile recovery. Ya know, thinking about how wrong those folks were is enough to chase away any residual blues left over from last week. In fact, thinking about those folks as wild-eyed wanderers shouting doom from a hilltop makes me smile.

Here is something to ponder, as you think about trading, the global economy, and the future …

  • Nigeria, Africa’s second-biggest economy, grew 6.5 percent in the third quarter from a year earlier … Oil output in Africa’s biggest producer climbed nearly 6 percent from the corresponding period a year ago.

Trade in the day; Invest in your life …

Trader Ed