Random Thoughts on Apple and RIM, Plus 10 Trading Commandments
Emotion is the enemy when trading.
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:
If you listen closely enough, you can hear the performance anxiety percolating in the marketplace. As the savvy, soothsaying sommelier Jeff Saut told us, fund managers are wishing that the market trades lower so their underperformance doesn't look as shabby. And if you haven't seen Jeff is some seriously snazzy Western duds, you haven't fully experienced life to its fullest!
Yesterday we spied a few patterns of note in the S&P (INDEXSP:.INX) and NDX (INDEXNASDAQ:NDX), and communicated my current positioning. Again, out of respect for YOUR time, I will link to that rather than repeat it. Nothing bugs me more than redundancy. Nothing bugs me more than redundancy.
In a nutshell (this is me in a nutshell!), S&P 1435 and NDX 2700 are THE levels of lore for traders galore.
- Just when we got used to Apple (NASDAQ:AAPL) as the most important stock in the world (hand raised), the Cupertino crowd-pleaser has come up short.
- 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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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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 firstname.lastname@example.org.
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