Now what?! Did you say that today? We talked about plans last night and ten things you can do to make or save yourself money in the market right now. Here’s the article for you to reference – http://noramassetmanagement.com/tim-reazer/leading-off/
I want to spend some time delving deeper into one of those topics; chasing moves and finding yourself on the wrong side of a trade or investment. What do I mean? You’re reactionary. You went short today because of the news. Maybe you bought a stock today on a dip only to see the dip become a runway gap down. You didn’t have a plan last week to go short. You didn’t see a signal to go short last week – and your plan didn’t include going short this week. You also didn’t plan to buy any stocks on dips but you did so anyway. You’ve done this before and time and time again you find your self on the wrong side of good. I can help… I’ll share with you how I approach the markets and my stocks and options trading. I designed my approach to stop this very behavior I described above.
I have a five stock watchlist every week. I screen for stocks of certain quality. I trade and invest in only the best merchandise. For those five stocks I then write out the proper buy points for these stocks. All stocks have proper buy points, but not all stocks should be bought. I then calculate how I will purchase the stock. I scale in to reduce risk my risk. I set my stop loss should the stock go down. I set my maximum buy point. I calculate how much I’m going to purchase. I write down my potential profit taking zones. I even write down what would cause me to hold this stock for a potential big winner.
I do all of this to bring myself a sense of calm and purpose to every market day. I don’t react by the seat of my pants. I’m proactive in trying to give myself every chance to succeed. Once my above levels are set I’ll then design options trades around my core stock position. These levels are also planned out.
Why go to all of this trouble? Because I’m a probabilities trader and investor. When the market conditions are just right I can pick any stock and have a 75% chance of it going higher. If I screen for only the best stocks my odds improve dramatically. With my options trading I can design trades that provide me with an 80%-84% success rate. Sounds good right?! Well consider that with the above examples of success I still have a 25% chance and at least a 16% chance of failure. And when these trades fail it can hurt a lot – unless you have a plan.
As you can see I manage money with a plan. You should too. Treat your trading and investing as if it were a business. Make a plan and then stick to it.
If you’re curious about my process and how it could help your success email me at tim.reazor@noramasset.com or talk to me on Twitter @TJReazor
Best Regards,
Tim
