How to Evaluate Yourself Before Trading ETFs
July 28th 2009 at 1:00pm by Tom Lydon
The pursuit of “buy high and sell low” is just one aspect of trading exchange traded funds (ETFs) and stocks. The other aspect involves continually looking inward and exploring the role your head plays in the way you invest. Brett Steenbarger of the most excellentTraderFeed outlines ways investors can evaluate themselves, and we’ve thrown in some of our own thoughts, as well.
By examining your emotions, you can uncover both potential stumbling blocks as well as potential strengths. Depending on the trader, the answers will differ. Stop by Brett’s blog for more stories like these. He has a lot of sound advice.
1) What is the quality of your self-talk while trading? Are your thoughts negative, positive or neutral? The things we tell ourselves as we trade can impact the decisions we make or how we act.
2) How would your performance change if you eliminated a few days where you lacked proper risk control?
3) Does the size of your positions reflect the opportunity you see in the market?
4) Are you adding losses onto losses because of frustration? It can help to step back and figure out what isn’t working first, then strive to change it by finding strategies that do work.
5) Do you cut winning trades short because of fear or emotion? By employing an exit strategy, you may gain the confidence you need to stay in until the trend winds down and sends you the real signal to let go.
6) What’s your mood while trading? Happy and proud, or guilty and frustrated? Take a look at what leads to both positive and negative feelings, then do more of what brings on the positive, less of what brings on the negative.
7) Do you trade because of market opportunity or because something else is lacking in your life?
8) Are you being realistic in your expectations, or do you expect to double your money overnight?
9) What advantages do you have over other traders in the market? This could be knowledge, expertise, experience and so on.
10) Do you have a plan, and more importantly, can you stick to it? By keeping a simple plan in place that you can employ when you need to is one way to become a more successful trader.
For more stories on trend following, visit our trend following category.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.