What's Easy is Really Not

By Dominik Stone, former JPMorgan trader

I will give you one simple rule: When a stock doesn’t do what you expect it to do, sell it.

Here's some more:

1. Trade to trade well; not to make money. The money will follow if you trade well.
2. Fiercely protect capital. Keep losses small. Remember Buffet's rule: Don't lose money.
3. Act immediately without hesitation on qualified setups.
4. The only thing worse than being wrong is staying wrong.
5. If confused, see step #2.

No hesitating, no questions or doubts raised, no conjectures of the way it should have turned out, or might still turn out, no dreams of how it will do, what it was supposed to do‚ tomorrow.

The pro never says, "I’ll watch it one more day." He doesn’t phone an analyst who’s been following the company and ask, "What’s happening? Is there any news?"

All too often, the delay in searching for the "bullshit why?" is costly! The desire to be perfect is one of the prime bugaboos of the stock market, but it’s a compulsion that belongs on the psychiatrist’s couch, not on the exchange floor. And that means no berating yourself for having bought it, should it then go down, and no remorse for having sold should the stock turn around after you’ve gotten out and finally do what was expected.

A lot of people seem to be unaware of the fact that they are trading with a mindset that is inhibiting them from making money in the markets. Instead, they think that if they just find the right indicator or system they will magically start printing money from their computer.

Trading success is the end result of developing the proper trading habits, and habits are the end result of having the proper trading psychology.

Trading requires skill at reading the markets and at managing your own anxieties.

Easy, right? Nope…You see, what’s easy is really not.

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