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Random Thoughts on Apple and RIM, Plus 10 Trading Commandments

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Emotion is the enemy when trading.

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MINYANVILLE ORIGINAL

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

After sprinting to catch my morning commute, and then running from Penn Station to Minyanville HQ to arrive in time for a live radio interview -- because "Drama" is evidently my middle name this year -- I arrive at my turret with a bead of sweat on my brow, a Powerade Zero in my hand, and a slew of thoughts racing through my crowded keppe.

As your time is as valuable as mine, let's dive right in:
  • Check the chart below; if this pony doesn't saddle up and ride shortly, Boo the Bear would argue that another head & shoulders pattern is in the making. I added the NDX vs. Apple chart too, just so you have it.
  • The fact that folks still don't believe in the Research In Motion (RIMM) BB10 -- up 100% since September -- is bullish on the margin. I don't own it for a few reasons, the primary one being that after I met with the CMO and fell in love with the device, I shared those thoughts publicly. Given perception is reality in the marketplace, the last impression I would want to give is that I'm "talking my book."
  • If you're missing Hoofy & Boo, don't despair; they're on the comeback trail. If you wanna smile a bit -- because smiles are important -- you can see their body of work, here!
  • I linked to one of our 10 trading commandments above; lest you missed it -- and you would if you're half as A.D.D. as I am -- here they are, so you have 'em:
  1. Respect the price action, but never defer to it.
    Our eyes are valuable tools when trading, but if we deferred to the flickering ticks, stocks would be "better" up and "worse" down, and that's a losing proposition.
  2. Discipline trumps conviction.
    No matter how strongly you feel on a given position, you must defer to the principles of discipline when trading. Always attempt to define your risk and never believe that you're smarter than the market.
  3. Opportunities are made up easier than losses.
    It's not necessary to play every day; it's only necessary to have a high winning percentage on the trades you choose to make. Sometimes the ability not to trade is as important as trading ability.
  4. Emotion is the enemy when trading.
    Emotional decisions have a way of coming back to haunt you. If you're personally attached to a position, your decision-making process will be flawed. Take a deep breath before risking your hard-earned coin.
  5. Zig when others zag.
    Sell hope, buy despair, and take the other side of emotional disconnects (in the context of controlled risk). If you can't find the sheep in the herd, chances are that you're it.
  6. Adapt your style to the market.
    Different investment approaches are warranted at different junctures and applying the right methodology is half the battle. Identify your time horizon and employ a risk profile that allows the market to work for you.
  7. Maximize your reward relative to your risk.
    If you're patient and pick your spots, edges will emerge that provide an advantageous risk/reward profile. Proactive patience is a virtue.
  8. Perception is reality in the marketplace.
    Identifying the prevalent psychology is a necessary process when trading. It's not "what is," it's what's perceived to be that dictates supply and demand.
  9. When unsure, trade "in between."
    Your risk profile should always be an extension of your thought process. If you're unsure, trade smaller until you identify your comfort zone.
  10. Don't let your bad trades turn into investments.
    Rationalization has no place in trading. If you put a position on for a catalyst and it passes, take the risk off -- win, lose, or draw.
OK, lemme get this to you before that other bell rings; good luck today and remember that profitability begins within!

R.P.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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