Take Charge Of Your Trades

David C Nelson  Jul 01, 2008 10:00 am

Take Charge Of Your Trades
 
How to deal confidently with market woes.
 

 

The market delivered a one-two punch last month, leaving many investors disillusioned or at best confused.

Now it’s time to cowboy-up and get back on track. The Four C’s can help you get started:

Climb: Climb out of your cave or wherever you've been hiding and start to take charge of your portfolio. Yes, you've been bloodied but that happens to all good fighters. Let’s get back in shape. The battle may have been lost but the war rages on.



Confess: They say confession is good for the soul. Admit to yourself that maybe a few of your investment ideas in the last quarter were based more on hope than fundamentals. Yes, a lot of your favorite stocks, ones like General Electric (GE), J.C. Penney (JCP) and others have been hit hard. I’m not even going to mention financials. The point is, we all have bad investments on our books. Learn from your mistakes and move on. Stop placing the blame on others and take responsibility for your trades. Phrases like “It’s the Fed’s fault,” “It’s oil,” “We are in a recession,” etc. won’t help you get your money back.
 

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Construct: Construct a new game plan. Start by re-examining your investment process. Are you impulsively buying and selling stocks based on what someone has said on TV or are you doing the homework necessary to insure success? Stock ideas that come from talking heads, including this one, are fine for what they are but they are like a gun in the hands of a 5-year-old if you don’t do the homework that goes along with the responsibility.

Go through all of your trades, winners and losers alike. Identify patterns in your investment style that are contributing to your success or failure. Look at the other side of the trade. Somebody is selling you that stock for a reason. Go through the numbers. Don’t just buy a story.

Commit: Commit to change. Don’t just give it lip service. Many of us have great ideas and promise to change but few actually make the commitment. Those who do eventually find success. You can do it, too. Go through the above process and identify just one thing you can do to improve your chances and make the change. Write it down, put it on a Post-It note taped to the trading screen -- whatever you have to do to keep reminding yourself -- and just do it.

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Comment (1) See All Comments »
07-03-2008, 1:46 pm
I read this article a few days ago.

It has taken a few days to sink in, but I find this type of thinking is critical for this market (together with the control of emotions)

Thank you for the insight.
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