|The Top 10 Blunders
|December 5, 2006
In less than a month 2006 will be part of history. Filled with memories, record-breaking numbers and anecdotes to be told to your grandchildren.
The question is will you remember 2006 fondly or not—economically-speaking? If the answer is a resounding “Yes” then I applaud you. If you’re quietly shaking your head or hiding from the question altogether—shudders—then I say, now’s the time to make a change.
It might be cliché but it’s never too late to make a change. And with each New Year comes an opportunity for just that.
With the help of my Trending123 associate, Neuropsychological Trading Coach, Dr. Janice Dorn, I want you to carefully consider the trading blunders you may have made this year—and vow not to make those same mistakes in 2007!
THE TOP TEN BLUNDERS
It’s time to open your eyes and ears. Get ready to listen and learn because the secrets to your trading and investing success are coming at you right now.
I have decided to give you The Top 10 Blunders “one at a time” so you can read them, memorize them, teach them to your talking bird, tattoo them onto your body or do whatever it takes to learn them. By learning, I do not mean just parroting (bird pun intended) them back in some kind of mindless recitation. I mean to use your most powerful trading and investing platform (your brain!) to receive, process, consolidate and entrain these as memory patterns which become so repetitive that they are second nature to you.
Let’s start off with the first 5 today and I’ll follow up with the last 5 in the next Update.
(1) Failure to Preserve Financial and Neuropsychological Capital
The greatest source of failure in trading and investing is loss of capital. After all, if you lose it, you are out of the game. If you lose your money, you have to go out and find more money to put into your account. If you lose your emotional stability, you have to go out and find ways to get it back.
In either case, you will need to leave the markets for a while and get your financial and emotional act together. This takes a toll, gets you out of the flow and inflicts damage to you in ways, which may not be immediately obvious.
Granted, some of the best traders have gone through complete wipeouts, and come back stronger than ever. These are the legends that are few in number and who live to write books about it or become so-called market wizards. These are the true comeback kids.
The rest of us are not so lucky, and we just go quietly (or kicking and screaming, depending on personality style) into the night, tail between our legs, buried in shame and guilt never to return.
Small losses almost always become larger and larger losses, leading to every manner of emotional distress as you are holding and hoping, or in complete denial that the position could possibly turn against you. Holding and hoping leads to larger losses and more emotional carnage until you are a financial and neuropsychological basket case and you just want out at any cost.
You are now in a state when both financial and psychological capital is depleted. All because you didn’t take a small loss.
OK…you get the point now? How do you preserve your financial and psychological capital? You take small losses. You take small losses! You take small losses!! You let winning positions run and take profits as they are running.
The single biggest reason for failure as a trader or investor is the inability to take small losses.
(2) Failure to Take Personal Responsibility for Your Trades and Investments
We buy stocks, options, futures, currencies and commodities because we want them to go up and make profits. We short them because we want them to go down and make profits. There are three bottom lines here:
(1) We trade to make profits
(2) So does everyone else
(3) Someone has to win and someone has to lose
Really, it is what it is and it will be that way until it isn’t. So, why do so many of you lose money consistently? Why is it that you put on a position and it seems like it goes against you immediately?
For most people the answer is clear: It’s “them”. “They” are doing this to the stock. “They” are taking it down. The newsletter writer is an idiot, the guy who told me to buy the stock has no clue what he is talking about. What is wrong with all of these people? Don’t they know that this stock has a really low P/E, great earnings history, is innovating and is a fantastic company? After all, I heard it mentioned on some TV show, and the analysts almost all have a buy on it. Why is it not going my way?
(3) Failure to Master Your Emotions
When dealing with people, remember you are not dealing with creatures of logic, but creatures of emotion…Dale Carnegie
In a way, this is the most challenging of the Ten Biggest Blunders that traders and investors will make in 2006-2007. Why?
Unless and until you are at the point where you “get” that successful trading and investing is at least 90% neuropsychological, you are destined to be on an eternal search for someone or something outside of you that will tell you exactly what to do, how to do it and for which you are likely to pay large sums of money.
When that system fails, you will go on to another service or newsletter or the latest guru who will tell you what works for him or for her and that it should certainly work for you. When it doesn’t, you will begin the search once more.
Eventually, you will come to realize that, although there are tools, platforms, indicators and signals unlimited, every answer to trading and investing success lies within you. External forces can and may facilitate some progress, but, in the final analysis, you absolutely must do the inner work required to take you to trading and investing mastery.
(4) The Biggest Blunder Investors and Traders Will Make in 2006 and 2007
Repeatedly…I have sold a stock while it was still rising—and that has been one reason why I have held onto my fortune. Many a time, I might have made a good deal more by holding a stock, but I would also have been caught in the fall when the price of the stock collapsed…Bernard Baruch
This piece is about you. How you view and manage money is determined by your personality and is uniquely yours. Your psychic structure is grounded by the way in which your brain is hard-wired and colored by the soft-wiring which comes from years of being in the world. Your experiences, losses, wins, conditioning, hopes, fears, loves and dreams are all patterned in your brain and determine how you feel, think and act.
YOU determine how much you will risk. You do not allow the markets to determine that for you. In approaching the markets, you realize that so many things are out of your control completely. The market doesn’t know you, your rules or anything about you and doesn’t care. Having grasped that concept, you do what you can to control what you can control.....your own personal risk. This is a fantastic opportunity for you to make your own rules and to keep them.
(5) Failure to Plan Your Trade and Trade Your Plan
Welcome to Crash and Burn Airlines, Ladies and Gentlemen and we hope you enjoy your trip today from San Francisco to San Diego. We wish to remind you that the pilot has very few navigational aids, no instrument panel, no co-pilot no flight plan and will be flying by the seat of his pants. Alcohol (lots of alcohol) will be served.
As ludicrous as this may appear, it was actually true in the early days of aviation when the pilot flew using his intuition (dead reckoning) and any other skills he managed to muster in the course of his training.
The same thing happens with traders. They have no trading plan and enter the markets with their gut feel, intuition, hot tips or because this or that trade or investment might work. Clearly this is a recipe for disaster and yet many traders do it over and over again. For an endless variety of reasons, they have failed to make a trading plan. Compounding this is the fact that even those who do take the time to make a trading plan are unwilling or unable stay with it and execute it consistently. It is incongruous to imagine a general going into battle without a plan, a coach going into a professional sports event without a plan, a pilot beginning a flight without a plan, a professional gambler sitting down at the table without a plan, or any elite athlete entering a competitive event without a plan. Yet, unfortunately, traders and even investors do this on a disturbing consistent basis. If you want to fly by the seat of your pants, then you might be advised to get out of the markets and consider a career in the Cirque du Soleil where people might pay to see your death-defying antics.
Look for the other 5 blunders in next week’s edition. Until then…learn how you can start 2007 off on the right (correct) foot today.
Today, you can start the journey with my 3 brand-new Hot Stock picks.
EOG Resources Inc. (EOG)
EOG Resources, Inc., together with its subsidiaries, engages in the exploration, development, production, and marketing of natural gas and crude oil primarily in the United States, Canada, offshore Trinidad, and the United Kingdom North Sea. As of December 31, 2005, the company’s total estimated net proven reserves were 6,194 billion cubic feet equivalent of which natural gas reserves were 5,557 billion cubic feet; and crude oil, condensate, and natural gas liquids reserves were 106 million barrels.
Pioneer Drilling Company (PDC)
Pioneer Drilling Company, through its subsidiary, Pioneer Drilling Services, Ltd., provides contract land drilling services to oil and natural gas exploration and production companies in the United States.
OMNI Energy Services Corp. (OMNI)
OMNI Energy Services Corp. operates as an integrated oilfield service company in the United States. It operates in two divisions, Seismic Drilling and Environmental Services. The Seismic Drilling division principally operates in the marsh, swamp, shallow water, and contiguous dry land areas along the Gulf Coast, primarily in Louisiana and Texas. The Environmental Services division provides dock-side, and offshore hazardous and non-hazardous oilfield waste management; and environmental cleaning services, including drilling rig, tank and vessel cleaning, safe vessel entry, naturally occurring radioactive material decontamination, platform abandonment services, pipeline flushing, gas dehydration, and hydro blasting.
Find out more about each Hot Stock through my audio alert; including its target price, pattern trend and upside potential.
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P.P.S. Stay tuned for my next round of Hot Stocks… coming soon to an email box near you!