- Know Thyself. An investor’s greatest enemy is often themselves. It’s our emotions and desire for large, quick gains that causes us to break our trading rules and rush into trades. We chase a stock that is extended far above its average mean or has risen parabolic because of our fear of missing out (FOMA). It may still go higher, but it’s risky. The solution? Take the time this year to develop a checklist or set of rules for a trading set-up that’s perfect for you, and only enter a trade when all the conditions are in your favour. Consider your longer-term objectives, investment style and risk tolerance.
- Sell Your Losers. It’s a common problem. We let our losers run, hoping that the trade will turn around, and we end up turning an annoying but manageable loss into a portfolio-killer. Hope is another one of those emotions, the worst for an investor. So, why do we let it get the better of us? Usually it’s because we are unable or unwilling to admit that we made a mistake. After all, it’s painful; a blow to our ego and our trading account, especially the longer we wait, and the stock doesn’t turn around. The solution? In 2018, commit to determine a precise stop-loss on every trade should it go against you. Do it before you place the buy order. If you’re using an exclusive VectorVest stop such as the SELL recommendation, set your stop in Portfolio Manager and follow it. Otherwise, use stop-loss orders with your broker and never cancel them unless you’re raising your stop on a winner.
- Don’t Fight the Market. VectorVest says market direction is the single most important thing you need to know to make money in stocks. Yet a common mistake is that investors think they know what the stock market is going to do, or that it doesn’t matter because they’re buying such a great stock. Well, once the market starts falling, it can fall fast and far, pulling most stocks down with it. You don’t want to be a buyer when that happens. VectorVest doesn’t predict market direction. We track, analyze and follow it. So, in 2018, resolve to faithfully “Heed the Color Guard” as VectorVest instructors like to say.
- Stop Trading Too Often. Anxiety and impatience will make you trade imperfect set-ups and lose money as a result. Winning investors and traders only trade the best set-ups, and so should you. While it’s important to have some reasonable diversification for risk management, trading too often and holding too many stocks affords you less capital to deploy in your best positions. Have you ever noticed when you run a search for stocks with great fundamentals such as high RS and VST, the top 20 stocks tend to outperform the top 30? The top 10 outperform the top 20, and the top 5 outperform the top 10. It’s usually the same in your portfolio; the top performers account for most of your gains. So, in 2018, stop trading so often, instead, invest more time and money in the highest quality stocks, the ones that are perfect for you. Consider adding to your winners along the way up, and never add to your losers (averaging down).
- Find Your Trading Edge. To be a successful trader or investor, you need an edge – that one strategy or method of discovering opportunities that you can virtually count on to deliver consistent gains. Whatever that one thing is for you, in 2018 focus on it and master it before you seek out and add that next best thing.
Finally, don’t forget to register for tomorrow’s International Online User Group Forum. We’ll be reviewing VectorVest’s Model Portfolios around the VectorVest world to uncover the best trading systems for every investment style. Perhaps we’ll discover a strategy that becomes your trading edge. HAPPY NEW YEAR EVERYONE.
INTERNATIONAL ONLINE USER GROUP FORUM
SATURDAY, JANUARY 6th 11:00 AM EASTERN / 08:00 PM PACIFIC
How To Trade VectorVest’s Model Portfolios, presented by Stan Heller, Consultant for VectorVest Canada
Stan, could you devote Q & A time to the technique of placing long ” limit buy” orders under actual and varied conditions of stocks movement and volatility for day trading and especially swing trading, using real math examples, including initial placement and movement of protective limit stops. I am referring to right of chart data, when what is coming is unknown and only past stock price action and trend is known. Placing orders “at the market” is pretty straight forward for buy and hold traders but doesn’t that require use of mental stops? I us CIBC Investors Edge and it tends to be confusing on placing protective stops. Are most Broker’s on line order entry pages about the same? Do you have an order entry paper where you plan and document each trade entry data and post entry follow up data? Thanks for your work and your consideration of this thought.
By the way, I now reside in Nanaimo since July 2017 as the Parksville, BC apartment building I was living in was completely evacuated due to a major fire damage. Very unsettlying!!!