As the old saying goes, “It’s better to be bored than broke.” At least I think it’s an old saying. In any case, it’s a good saying.
When it comes to trading in the stock market, it is much better to be bored and wealthy than hyped and broke.
Trying to guess which stock to buy and when is like playing roulette in Las Vegas. You may hit the jackpot once in a while, and we all know how exciting that is. But it’s a safe bet over the long run that the house (the market) will win.
I know trading with QiT pales in comparison to a two-day trip to a city whose focal point is called, “The Strip.” A city that espouses “What Happens in Vegas, Stays in Vegas.” But the overall rewards of long-term financial gains will always outweigh the short-term excitement you get from trying to unravel the intricacies of blackjack in Vegas.
However, even if you trade with a proven system, you can still take a ride on the proverbial emotional roller coaster. Unfortunately, our brains are wired to work against us and make things as exciting as they can be.
Let me set the stage
November 21st, 2021 (I’m the director of this play so I get to pick any date I want) I have a signal to go LONG Coyote Widgets (symbol WYLI). Using the Calculate Shares window on the Member’s Site, I calculate I need to buy 200 shares. I place the order that night (boring!). The next day, I follow the rules of algo trading and do not check my positions. However, I notice when I go to place my orders that evening for the following day there is no WYLI meaning my entry price was not hit (boring!). Normally I would just move on but here is where all hell breaks loose.
The following day – the day after I missed the WYLI trade – the WYLI CEO is caught with his secretary in a place they should not have been caught. The stock falls off a cliff (like poor Wylie so often does) and plummets 20%.
Going into this I had no idea by how much I missed the trade, one penny or one dollar because it didn’t matter. At least it didn’t matter until WYLI plummeted 20%! So guess what I do? Yup, I check to see how much I missed that trade and here is where it gets weird. Do you know if I missed that trade by a penny I would be sitting back thinking I’m the smartest person in the room when in reality, I’m the only person in the room? I’m thinking I’m sure glad I dodged that bullet. If I’d missed by a whole dollar I’d be pleased but less so.
Why are we built like this?
Now let’s reverse the scenario. The day after I place the WYLI trade but do not get a fill, WYLI announces blowout earnings and it pops 20%. And, of course, as in the previous scenario, I check by how much I missed the trade and, if it was only a penny, I hold my head in my hands and think I may dunk it in a bucket of ice water. If only it had moved one more penny! However, if I missed the fill by $1.00, I wouldn’t be feeling good but not anywhere near as bad as if I missed it by a $0.01.
See how successfully I interjected excitement into my trading?
The end result is that missed the trade!
In both scenarios, dodging a losing trade or missing a huge winner, the penny makes me feel a lot different than if I’d missed by a dollar. The truth is if I would not have checked how much I had missed the trade, to begin with, I would have avoided the emotional rollercoaster ride entirely.
Why are we built like this?
When I first started trading, I traded everything (options, futures, forex, equities) and would have traded toothpicks if there had been a market for it. Life was very exciting when I was trading Crude futures and, to tell you the truth, I miss the jolt I would get when a trade moved in my direction. On the other hand, I surely do not miss the feeling in the pit of my stomach when a trade moved against me.
I have been known to shout obscenities at my monitor on more than one occasion. That was when I viewed the stock market as some view a casino. If I hadn’t found the antidote to this malady, I wouldn’t be trading today.
If you want to be filled with excitement and emotion take up bungy jumping, you won’t get it here.
ALWAYS FOLLOW THE RULES
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