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Trading philosophies and thoughts

Stock Market Panic Attack

I don’t know what have gotten over me, suddenly I’m overwhelmed with a mortal fear that the stock market is going to crash.  Whenever I have this kind of feeling creeping over me, which doesn’t happen often, I automatically liquidate my swing trade positions and raises cash which I’ve done this morning.

Why am I feeling this way?  It is hard to pinpoint to any specific event.  Sometimes it is a combination of events that just simply spook me unexpectedly.

I bought back in $DCTH this morning at market open due to strong open and the fact that the general market was also up.  Then $DCTH went thru a fast sell-off which forced me to liquidate in order to cut my loss.  No, I wasn’t about to let this one trade to take away my $DCTH gain I made in the last few days.  Right after I sold, $DCTH popped right back up.  Now, this type of events are quite common in the trading world and you just have to accept them and move on. Gawd know how many times I’ve to endure these events but I know this is the price I have to pay to survive in this market.  Nevertheless the memory of how I’ve saved myself from countless colossal losses by acting fast encourages me to keep selling prematurely my long position to cut losses or lock in gain on my swing trade positions.

Anyway, after I sold $DCTH and witnessed the big pop up, I was irritated as usual.  No big deal since this type of frustration will wear off quickly once I see another trading opportunity presents itself.  But this morning, the DOW headed lower without letting up and the mini-SP500 was tracking almost breakeven for the day after opening up 7 points higher.  That by itself is also not a big deal; but then I saw $PACB tracking a red bar and it just triggered something inside me.


Just like that, my mind went into panic mode and I started selling every swing trades I owned at the moment.  I’ve learned to stay true to my core position trades so that I won’t be left with no position when market continues to head higher despite my panic attack.  Years ago when I had these rare panic attacks, I went 100% cash and watched the market took off without me.

Well, I think the panic attack is the sign that either my body and mind have been pushed too far without sufficient rest and break or that I possess a 6th sense that forewarns me of incoming market doom.

I can tell you that the former is more likely than the latter; nevertheless there is one truism that I behold that allows me to survive and stay profitable for all these years in trading- when in doubt, move to the sideline.  In time, I learn that staying on the sideline doesn’t mean I’ve to be in 100% cash; I just don’t load up like I  normally do.

I’m going to heed my panic attack by taking a break to allow my body and mind to balance themselves. Time to read a good book and smell the roses.

Currently holding $LRAD, $AMRN, $USU, $SZYM, (starter position on $FAZ, $TVIX), and 51% cash.

My 2 cents.


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The evolution of a dime store blogger

Ok, in my early stage of blogging, I was as ignorant as a clueless ant walking blindly in circle without a sense of the surrounding social media phenomenon.  Like a baby-face farm boy who was oblivious to the metropolitan world of communication, I logged in my trades under the comment area of my blog post while others are sharing their trades and quick thoughts on the super-highway of twitter.

“If you’re not using Twitter to promote your work, you’re a f*** idiot” The Fly proclaimed in one of his post.

Holy Jubilee! Time to get off my lazy ass and learn to ride the twitter highway.

Slowly and in baby step, I dipped my toe in and began to walk on the twitter highway.

And a lot of walking I did; so much so that I ignored my blog for the easy twitter updates.

Talking about walking, if The Fly has thought of “Walk the Dog” while reviewing my blog “followingpriceaction.com”, something is not right.  I suspected it must be the word “following”.  Yes, it must be it; dogs always follow their masters. (Hint: Price Action is our master in the world of trading.) Originally, I chose the blog name to remind myself to follow the price action; but then, thanks to The Fly’s reaction, a reminder doesn’t necessary make a good blog title.

In some way, I’m glad of The Fly’s brutal honesty, Followingpriceaction does sound limited in scope.  So, I enlisted the help of my family members and came up with one we agreed on:


I like it.

Think about it, it doesn’t matter what technical tools or fundamental stories I am using to back up my decision on a trade, it is essentially my 2 cents in the end.  All I am doing is to build a supporting structure using chart patterns, momentum indicators, fundamental story, etc. to give me confidence to execute a trading decision.

An interpretation of a chart is nothing more than my 2 cents in attempting to forecast the short or long term direction.

My belief in the fundamental story of a stock is nothing more than my 2 cents in attempting to form a vision of the future.

Nothing is ever guaranteed in life and everything has its own risk; but it all starts with our taking a position or direction based on our 2 cents.

History has shown that while it is in our nature to take risk, it can be catastrophic to take risk for granted.  Our 2 cents can only takes us as far as we are correct (aka being right); but to ignore the risk (aka the cost of being wrong) will be foolhardy.  This is why we must always take precaution to cut our losses when our 2 cents turned out to be worthless (aka being wrong).

Although followingpriceaction.com started off as a reminder for myself, tradingmytwocents.com also has a reminder baked in- because it is ONLY my 2 cents, there is no need to prove how right I am.  If I’m wrong, I can throw my two cents away.  In other words, don’t pay top dollars to keep your two cents and learn to cut your losses quickly folk!

TradingMyTwoCents.com is my next step in transforming myself as a blogger.

Let’s see where it goes.

I’m going to try again for the ibankcoin interim blogger contest if it is still on.  If I’m ready, I’ll win a spot; if I’m not ready, then I’m simply not ready.  After all, it is only my 2 cents anyway.

Thanks for listening.

ps. I do not know where to go to change my twitter username in this blog; however, I’ve send an email to [email protected] to ask them to change my twitter username from @followtheprice to @tradingmy2cents.


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Market gives and market takes…

Hey, I made money on $MJNA, Yay!!! (market gives)

Ouch! I lost money on $ETRM.  (market takes)

And that is the way the market works!

The trick is to hold on to the gain the market gives you without letting the market takes back too much.  To do that, we need to wrestle with our greed.  Yes, you heard me.  By wrestling with greed, you are actually taking action to prevent greed from dominating your trading decision.  If you don’t wrestle with your greed, then you are allowing greed to dictate your trading decision which oftentimes will decimate your portfolio.

There were moments in the last two days when I wanted to add to my $ETRM position; but a voice in the back of my head said, “Hey, I think you’ve enough.  Don’t let your greed control you.  This trade is a gambling bet waiting on release of data.  If you want to gamble big, go to Vegas; at least, they comp you with free room…

Thanks goodness I backed off.  The fact that I backed off meant I wrestled with greed.

If $ETRM still trades at the after hour price of $1.44; my loss here almost offsets my gain in $MJNA- market gives, market takes.

In the overall scheme of thing, I consider myself lucky.

Trade well!


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Conviction- which side are you on? Guilty as charged or The state of being convinced?

Previously, in my post on the courage of conviction I reminded everyone why the word courage was needed in the face of “your” conviction of a certain event; today, I like to talk about the degree of conviction we all have on the stocks we own.

Your conviction is a very personal matter and only you hold the key to what you want to believe is “true”; your version of “truth” that is, not the 100% fact of life happened to to your face truth. We all have our own belief of what is true based on what we know or what we “think” we know about everything and anything in our life.  As a result, we all have a tendency to step on other people toes because our version of truth doesn’t match with others.

Nevertheless, in trading, our version of truth is tested at a new dimension because our dollar is on the line.  Not only do we need to extend what we believe is the truth into the future by extrapolating what we think will happen, we are making a bet based on our conviction.  And as we all know, once you tap into the realm of the future, you are automatically tapped into the realm of uncertainty as well. Hence, courage is needed for your conviction of what you believe is the “truth” because your dollar is now at risk.

Now that I’ve gotten the introductory out of the way, let’s talk about what it takes to have conviction.


You know what I mean!  Oh yeah! You DO!

If I’ve ten stocks in my portfolio, I can only muster enough mental energy to have conviction for about 4-5 of the stocks to be considered as position trades.  The rest has to be swing trade because I can’t have 100% of my mental energy supporting the conviction for all ten stocks.  If I even attempt to do so, I will certainly going into tilt very easily (aka short fuse).  And the moment you are tilted (or blow your fuse), you lose your bearing on yourself and everything you know about exercising discipline in trading the market will go out the window.  All of a sudden, you are trading like a degenerated gambler who is secretly “hoping and wishing” the ten stocks you are holding will go up the way you expect it to do even though most of the ten stocks you are holding are tanking in front of you.

The point I’m trying to make is that you must select the few stocks you want to have conviction carefully and systematically.  In other words, you must do your due diligence (DD) to convince yourself that this is the right horse for you to believe in.  One that you can handle the drawdown because you know the prospect of a brighter future is still ahead of you.  If you don’t do your own DD and merely take on other people suggestion, then your conviction may not be strong enough to hold water.

Cases in point:

1) RIMM: Did my DD; plenty of conviction.  Took profit and jumping back in when momentum continued in the direction I was convinced it would. I had quite a good ride with RIMM since November of last year.

2) PACB: Took the trade due to other people alert of a possible breakout. No DD; therefore no conviction. Took profit but did not have the conviction to jump back in.  Missed a huge rally afterward.

Lesson #1: if you didn’t do your DD and therefore had no conviction; it is OK to miss the rally afterward since you are only going to deserve what you get bases on what you put in. You can kick yourself on the behind but don’t punch yourself in the stomach.

Lesson #2: select your stock you like and spend some time to do DD on it.  It can even be stocks you’ve picked up from others.  As long as you have done your own DD on it, you will have built up conviction to trade the stock more productively.

Lesson#3: there is only so much mental energy we each have; so don’t beat yourself up for missing a runner here and there.  Just stay focus on the stocks you have chosen to invest your time to build your conviction on.

In conclusion, let me ask you this, “are you guilty of beating yourself up for watching a trade takes off without you because you did not have the fortitude to hold on to your trade?”

If you answer yes, then do yourself a favor by telling yourself to do some more DD next time to build up some conviction first.  Meanwhile, give yourself a break because you are only getting what you put in.

Trade well!

Oh, btw, I’m only speaking from the perspective of a swing trader/position trader.  There are many out there who do plenty of DD with enough conviction to invest 100% of their investment dollar into their position trades without any swing trade being involved.

Oh, btw #2, even though I talk about position trade and the conviction to withstand drawdown, exercising trading discipline such as setting maximum loss trigger point still applies.


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The Courage of Conviction

Why is there a “courage” in front of “conviction”?

Good question!

Just because you have conviction (aka as your strong belief) doesn’t mean your conviction may come true.  Hence, you need to have courage to carry your conviction through the uncertainty period until the event(s) you are convinced will happen actually happens.

In my case, I’ve strong belief in the following:

1) AMRN will prosper with its fish-oil drug.  I believe millions of people will benefit due to our over-eating population around the globe.  RISK: Amarin bungles on its execution and the patent is sold for a song.

2) USU will prosper because the United States must have its own uranium enrichment facility to be considered truly energy self-sufficient. RISK: GE comes out with a much better uranium enrichment technology even though it will take many years to establish.

3) LRAD will stock the military and police department around the globe with its long-range acoustic devices. RISK: competitors (or copycat) come out to steal market share.

4) EMAN will change the face of our entertainment industry by providing a unique way to watch movie & TV shows and play video games in the form of a display goggle that provides a panoramic view that no movie theater or TV can give you. RISK: delay or change in company priority in designing the display goggle for the consumer electronic industry (in other words, the focus is more on military use)

In the case of The Fly:

1) VHC will prevail in court cases against AAPL, CSCO, and others with generous punitive damages and future licensing revenues stream. RISK: reward is not as generous as expected by the market.

As you can see, the RISK emphasizes the uncertainty and creates the necessity to have courage to stand behind your beliefs.

IMPORTANT REMINDER:  Courage means you have the audacity to face the LOSS you WILL incur when your conviction is blown to pieces (aka being wrong).

And this is the very reason why I don’t like to average down on my position trade when I’m going through drawdown.  You MUST determine a specific amount of money you are willing to lose in any position trade in case your conviction turns out to be wrong.  Once you set your target loss amount, you have a much steady hand in maintaining your courage until judgement day.

However, the moment you start to average down while you are going through drawdown, you are INCREASING your loss amount to a level that you may not have the courage to withstand.  In other words, averaging down while price action is going against you can weaken your courage and resolve.  And if you have blind courage, averaging down can destroy you.

On the other hand, when price action starts to bounce back from the downdraft and exhibiting sign of a bull trend, I do not have an issue of taking a swing trade on top of my position trade.  Remember, I’m taking a swing trade and therefore I must also adhere to the swing trade rule- taking my loss quickly if the swing trade doesn’t work out as planned.  Thus, if the swing trade is successful, I may be riding the swing trade position along with the position trade together.

The way I see it, successful swing trade help pays your bill and earns a decent living; but it is the successful position trades that buy you your yacht so to speak.

The courage of conviction, if you look at all the millionaires and billionaires out there, is the backbone of any successful venture out there.  Just don’t forget that courage is needed because you can literally be injured if you are wrong.

Trade Well!

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Staying on top of the basic

Here is a brief summary of my trading style:

1) I do not average down
2) I DO NOT average down

I know some of you do average down and all I can say is “Good Luck” to you.  Here is my past post on averaging down.

Another thing I don’t like is leverage.  I do not load up on leverage and I’ve done pretty well without using leverage.

So how do you make big buck if you don’t average down or leverage up?  Well, I tend to load up high beta stock (high risk with high reward).  Thus, in lieu of leverage, I like to pick stock that has the potential to be a 2x to 5x bagger.  But the catch is that if these stocks don’t do what it supposes to do, you can lose half of your capital you put in these stocks pretty quick.

On the other hand, I will NOT get a margin call because my pick does not work out.  Also, I always sleep easily because I do not go “ALL IN” in any one of my high beta stock.  20% of my cash portfolio is pretty much as high as I will go in any one stock.

For now, my cash portfolio has 3 high beta stocks: AMRN, USU, and LRAD and they occupy 34% of my portfolio.

Currently, all three are going through drawdown which I am prepared for.  Meanwhile, my gain on trading activities (mainly DDD & RIMM) have helped offset some of the drawdown.

I traded LRAD from the time when it was under the symbol ATCO.  I bought ATCO in 1999 at $7 and sold at $11 in early 2000. I missed the 2005 rally because I was not looking at ATCO then.  Then I bought a boat load of LRAD (ATCO changed their symbol to LRAD to represent their main product line more accurately) when it was trading at 50 cents due to the 2008 meltdown.  Because I bought a boat load, I also received plenty of bonus shares of PAMT from the spin-off.  For every 2 shares of LRAD, I received one share of PAMT.  Afterward, I added to my PAMT position until it did a reverse-split from around 80 cent into $4.  After some marketing push, PAMT rallied to $11.  However, I sold all my PAMT at $9 before it got to $11.  I’ve no problem taking profit before it reached the top because at the time, the volume was there at $9 for me to unload.

I also unloaded all my LRAD shares when it rallied to over $3 in 2011; however, I sold all my LRAD shares around $2.50 before it got to $3.  It was in 2012 that I started to buy back some LRAD shares for another rally in the future.

There were other baggers I caught in the past but the point I’m trying to make here is that you don’t need to leverage to the hilt to push your luck, you just need to find the right high beta stock to hit your homerun.  The only catch to this strategy is that you need to have patience.  Yes,  a lot of patience to wait it out is required.

Currently, I’m waiting for AMRN to give me at least a 2 baggers (knock on wood).

USU, on the other hand, can be a surprise here.  The way I see this, USU will instantly become a $2 billion dollar company if they get the Gov’t loan guarantee.  This can be a prospective 10 baggers.  I loaded up USU the way I loaded up LRAD when it was trading at 50 cents back in 2008.  The risk here is that the US Gov’t decides to let their only uranium refinery to go under.  What is the odd of that happening?  The risk/reward in this one is tremendous based on my humble opinion.

In summary, my strategy is actually quite simple.  I’ve loaded up on three potential runners; and then I spend the rest of my times finding swing trades to keep myself busy.  If you looked at my November trading journals, I did quite well on RIMM.

Trade well!

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Looking into the mind of …

What is the purpose of blogging anyway?

You want to share your thought, your opinion, your personal favorites, etc.

But are you sharing your superficial thoughts, stale opinions or are you sharing your experience that can resonate to others so that they can say, “Yeah, don’t I know it.  Glad to know how this guy resolves this ….”

Why am I blogging here?

I’ve come a long way to trading the way I’m trading now.  When I started, I wished I could read the blog of a seasoned trader and see how he/she traded each day and the thought that went into each trade.  I don’t want to hear someone “crying” over their bad trades or the “bad lucks” they are stuck with; and I sure don’t want to hear somebody beating their chest because they have one good trade that is based on unacceptable risk.

I wanted to read how the trader get him/herself out of a trade; good or bad.  When I discovered iBankCoin, I said to myself, “This is what I’ve been looking for!”

The Fly basically bares his soul and his trades for all to see.  If he has a bad trade, we witness the pain he is going through and his resolution to get out of his dilemma.  We may not agree to his action and resolution but you can’t dispute the fact that he opens his door for you to look into his mind.

To see The Fly’s willingness to share in his own creative way triggers my desire to do the same thing.

And that is why I’m blogging the way I am.  Basically, I time-stamp each trade I make (under the comment area) so anyone can reconstruct my trading activities and deduce whether I make money or not.  I may not time-stamp to the exact minute but I do so within a reasonable time frame so that you know my dollar is at risk.

I believe I’ve moved pass the “fear” factor that used to paralyze me at time of execution.  Do you remember the time when you’ve seen a technical signal screaming at you to execute; but you just could not act?  I’ve been there.

Now, I just take the signal and place my stop loss target.

Blogging is just my way to remind myself to stay calm, to pay attention, and to be responsible for each trade I make because someone is watching.  There is no better “outside force” than here since I know I’m not the only one exposing myself in my trades.

Trading is simple but difficult to execute.  My goal is the follow the price action and trade accordingly so that you can see that it is really not that difficult at all if you get yourself out of the way.

How do you get yourself out of the way?

Well, vote for me and I’ll demonstrate along the way…

Trade well.

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Perfection within the imperfection of trading in the chaotic market

Before you say it is impossible to be perfect; hear me out first.

Let’s start with premises we already know:

1) Trading is tough because the market is volatile.

“Wow! what a big run up yesterday! The market is going up! Yeah! Wait a minute!  FUCK!  The market is dropping like a rock now!  What’s the FUCK going on here???”

2) There is no perfect trading system

“I paid %(#$)#@ for this trading system and I had FUCKING four losses in a row!  What’s the FUCK!”

3) Taking loss is inevitable; it is as certain as death and taxes

“I don’t wanna take my losses!  The price will go back up!  I’m sure of it!”

The above three items pretty much define the “imperfection of trading in the chaotic market”.

So, let’s talk about the perfection, shall we?

The only thing YOU can control during trading is your execution.  Buy, sell, hold, or neutral, you have total control to decide which action to execute.  YET, while simple in principle it is not easy to execute, failure to execute means you are GIVING UP control.  And with no control whatsoever while you are trading, you are DOOMED.

Don’t waste your time justifying that you are in control by simply making a decision to hold a losing position beyond your original stop point.  You lost control because you could not execute to close your position to take your loss.  Thus, your short-term trade now become a long-term hold (aka bagholder).

Perfection in trading is simply being perfect in executing your trade the way you plan it.  Whether you make money or not is irrelevant as a single trade; but in the long run, your being “perfect” in executing your trades will guide you to profitable trading.

Some of you who read my blog know that I usually trade the same group of stocks over and over again.  The reason is because I’m familiar with them.  While I don’t know every nuance about them; I know enough about them to execute my trades according to my plan.  This is all that matter.

While I strive to be “perfect’ in executing my trades, I may not be perfect in “timing” my trades.  Sometimes I’ve taken profit too soon or losses too quickly; but that is ok.  You know why?  It is because I don’t have a crystal ball.  Hence, without a crystal ball, I’m allowed to be “imperfect” in my timing.  As long as I can jump back in after I get out. albeit at a higher price if not at a lower price; I’m not complaining.  Isn’t this is what trading is all about?  Jumping in and out with the object of taking a piece of the pie without losing your shirt?

Perfection in your execution doesn’t have to be difficult; all it takes is that you keep this simple rule in the forefront of your head- cut your losses fast according to your plan at all times when you are trading.

Regarding my interest in becoming a tabbed blogger, I’m actually quite ambivalent about it.  If you vote for me and I’m elected, I will continue to post my 2 cents as well as my daily trades as I make them.  But it really doesn’t matter if I become a tabbed blogger or not; I will still post the way I’ve been posting.  There are a few bloggers at Blogger Network who also deserve to be a tabbed blogger; so I won’t be doing “shitting” on anyone.  My REAL goal is to make a boat load of money while posting my trades here.

IF I become a tabbed blogger, I may have to increase the creative factor in my posting so that it will be more fun than just posting my daily journal.  The way I look at it, being a tabbed blogger means that imperfection in your trades will become even more highlighted for more eyeballs to see.  Thus, in some way, being a tabbed blogger will force me to achieve perfection in the execution of my trades.

Tabbed or not, making good trades will always be my ultimate goal.

Trade well.

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The True EDGE in trading

So everyone is supposed to have an edge in order to win in this stock market game, right?

But what edge are we talking about here?

In general, when people talk about edge, they often refer to statistical advantage.  We will call this type of edge “technical edge”.

But to me, technical edge becomes zero edge if you don’t have the discipline to follow it.

I know I repeat this again and again but I think it is worth repeating because it is my opinion that “being discipline” is the true edge that allow you to beat the other 90% of the trader in making it.

In other words, you can be very proficient with the following:

– Chart reading that included your understanding of all popular chart patterns such as head-and-shoulder, cup and handle, double top, double bottom, flag, triangles (symmetrical, ascending, and descending), wedge, gap, triple top, triple bottom, and of course candlestick chart patterns.

– Technical analysis that included all kinds of oscillator and momentum indicators.

– Other chart & technical analysis that I did not mention above

And you still have no edge if you allow your emotion to dictate the better half of your trading decision.

But discipline doesn’t just drop on your lap without effort. You have to work at it.

To begin with, you need experience.

If you are a trader, either as a beginner or intermediate, you are already on the path to gaining experience.  However, experience alone will do nothing for you unless it is being reviewed and analyzed by yourself.  By reviewing your trades, you learn to become a witness to your own trading decision.  But to be a true witness of yourself during trading, you need to be self-aware.  Instead of living in your own fear or greed, you learn to stand back and watch yourself being in fear or greed.  If you can possess this type of self-awareness to witness your fear and greed, you will have the self-awareness to “choose” not to let it interfere with you trading plan.

Below is an example of your NOT being aware of your own emotion:

“FUCK! Why the FUCK did the stock have to go against me after I bought!  It HAS to go up.  I KNOW it!  I’m buying some more here!”

Below is an example of your being AWARE of your own emotion:

“Fuck! I may be wrong again. I HATE being wrong. Look like price action is going to hit my stop soon.  FUCK!  Oh well, moving on.  I will watch to see how this stock behave in the next couple of days.  I will take the next buy setup signal if there is one.”

When you are aware, you are not living inside your fear, anger, frustration, and greed.  That mean you still have the ability to choose to side-step your fear and greed and stay the course of your trading plan.  But to get to this level of being able to side-step your emotion, you have to climb THE mountain.  That is, the mountain of self-awareness.  And climb you will if you are commit to the path of trading well.   In time, your constant awareness of your emotional reaction and your effort to bypass these reaction will become less of a struggle and more of a habit.  And before you know it, your habit is your discipline.  And following your trading plan will become second nature.

All the effort in gaining self-awareness not only make you a better trader but a better person in life.

This is how discipline becomes you and this is how you become discipline.

You see, the true edge in being a winning trader is not the technical edge, it is your ability to commit to your risk management and trading plan because you possess self-awareness to bypass your own emotional hindrance.  We are all human; therefore, we will have our emotion.  The key to avoid living inside your emotion is your self-awareness.  And because you are self-aware, you have the power to make a choice.  With practice, your choice of following your trading plan despite your fear and greed becomes a habit.  Viola!  You now have discipline.

The road to true edge only appear to you when you are ready.  You can be reading this and agree wholeheartedly; but if you are not ready, this information will be forgotten the next day when you are staring at your loss with anger or fear.  If you are ready, you will understand what you need to do to gain this self-awareness.  In my case, I stopped buying books on trading and took up Tai Chi and meditation.

Good Hunting!

ps. Oh yeah! If you are ready, you can also do what Yogi and Boo Boo does.  Start trading small lot so you can learn to take small losses.  In time, taking small losses become a habit.  Then progress to move up the ladder by increasing your lot size in small increment to acclimate yourself.  This is the same technique in martial art training when beginners are forced to spar with partner to learn to acclimate to the punches and kicks coming at you.  You know your partner is not going to hurt you bad so you begin to put aside fear and learn to dodge and defend yourself with proper martial art techniques.  This is the same principle in trading.  You know you are not taking big loss so you learn to put aside your fear and greed and learn to apply proper risk management and following your trading plan.

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You want to bank coin? Say good-bye to dime store economist

What is the difference b/w a dime store economist and a college kid who just got an “A” on his/her economic 101 class?


Not much!  Both are using “fancy” terminology to tell their stories of how the world’s economic system “should” be doing this or doing that; or why the economic system is not working because of this and that.  And while both of them  may be clueless to what is REALLY happening, they both offer their stories FOR FREE.

Now, what is the difference b/w a dime store economist and the economist whose work get published by the trade magazine?   Nothing except one of them get paid handsomely while the other get nothing.

Ok, what has this got to do with us being a trader?

Simple, if you want to trade, STOP listening to the dime store economist and START listening to the price action!

What is even more harmful to your trading is when you become a dime store economist yourself!

Sure, you can have an opinion on the the current economic condition but the moment you “invest” into your theory, you are screwed!


Yes, how many wealthy economists do you see out there (not counting the ones whose salary are paid by the like of “too big to fail” bankers)?

The moment you INVEST your EGO into an economic theory of why the market should be doing this or doing that, you are NO LONGER listening to the market.  You know why?  It is because you just put yourself into another “I need to be right” mental mindset.

Good Grief!  Now, you get two “I need to be right” in your market position:

I need to be right #1: My very logical economic theory

I need to be right #2: My decision on a stock purchase (or short sales) that is losing money.

As a trader, economic theory is just another “probability” that could be wrong!

As a trader, the decision to buy (or short) is just another “probability” that could be wrong!

And what do you do when you are wrong as a trader?

You get the FUCK out of your position to cut your losses FAST!

BUT you can’t do that if you have TWO “I need to be right!” mental mindset going against you!  And if you are a more seasoned trader, these 2 mindsets will deter you from cutting your losses quickly!

Of course, this is just my opinion.  And that is why I like to blog only “theory” about price action based on my chart analysis.  It keeps me focus on what is important- what is price action doing today and what it is likely to do tomorrow?   Anything further than a week and I may end up being a dime store economist myself!

My only antidote to becoming an accidental dime store economist by predicting price action further than a week is my readiness to admit to myself that I’m WRONG again!

Good Hunting!

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