You board any airplane today and before it takes off, the flight attendants review all the exits with you. Cruise ships do life boat drills before departure. Exits on trains and buses are also clearly marked and labeled for emergencies. Clearly, the point is that you need to know how to get out. Your life just may depend upon it. Similarly, your financial life might also depend upon knowing your exits.
I recall reading the Market Wizards books years ago and learning how a large percentage of the wizards formulated their exit strategies BEFORE ever buying into their positions. In my mind, I label that the race before the race.
My habit is to formulate my exit strategies when the markets are closed. I like to think that I'm using my rational silicon brain. When the markets aren't open, I'm calm and unhurried — strategically formulating both bearish and bullish scenarios. I can plan out specifically how I'll pyramid into my position and which accounts will get allocated in pre-calculated proportions. Then I deal with conquering my own hopes and fears, my dreams and promises with respect to the specific investment at hand.
Too many times, I've witnessed investors try to formulate exits on the fly in the middle of a trade during market hours — only to have the silicon brain vaporize and the human brain kick in. In those moments, they suddenly move to the fictitious Lake Wobegon, where as Garrison Keillor says, everyone thinks they're far above average.
The stock market is episodic by nature and will consistently generate a crisis of beliefs and emotions which in turn produces indecision and brings delays. Markets, money and moods are all bundled together by your beliefs. I learned to wrestle with this triumvirate best during off hours. You need to enter the battle having prepared yourself mentally and emotionally beforehand — coming equipped with both bullish and bearish scenarios that are appropriate to your personal trading plan and timeframe. Only then will you be ready to listen to what the market has to tell you.
The market is a jealous mistress that's determined to have it her way and only her way. Once you learn to approach her with this mindset and obey her, the market will share her profits and riches with you.
Friends! Come join me for...
"The 10 Stages of Stock Market Mastery"
Next month – Saturday, September 28th at 9:00am – come join me here in Seattle for a special one-day seminar. In my "10 Stages of Stock Market Mastery" course, I'll cover the most important aspects of my personal investing system and share with you the routines and strategies I've used to trade the stock market for a living for more than 25 years.
If you're anywhere near the Seattle area (or if you're up for a quick trip out to the PNW!), this is a great chance to spend some quality time learning more about the markets, focusing on your portfolio practices and strengthening your investing approach.
For complete details and registration info, CLICK HERE.
See you on the 28th!
Trade well; trade with discipline!
- Gatis Roze, MBA, CMT
- Author, Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016)
- Presenter of the best-selling Tensile Trading DVD seminar
- Presenter of the How to Master Your Asset Allocation Profile DVD seminar
- Developer of the StockCharts.com Tensile Trading ChartPack