Earn more, Trade less
I’ve only been a trader for two years now but I feel the best lesson I’ve learned is this: In order to earn more I actually in most cases need to trade less. A wise person once said to me: “Let the trade come to you, wait until it’s screaming your name!”. I learned this lesson like I’ve learned every lesson in the stock market…the hard way. During three months of my two year trading career I attempted day trading. Day trading is the art of entering and exiting a trade in the same day. I did not master the craft, in fact I failed from a profit point of view. I was mostly trading US tech blue chips and the Canadian medical cannabis sector because the news cycle was almost daily. It was fun while it lasted and I learned a lot but day trading is not for me. My phsycological profile does not line up with that of a day trader. Day trading is a state of mind that must be mastered over time. I’m not that quick and precise. I like my strategy for investing which is to pick the best companies possible and invest in them rather than trade them.
Why I lasted three months
At first it went great! The volatility was ever in my favour and I had accomplished my annual profit goal of $15 000 in a few weeks. Things couldn’t have been better. Then the news cycles began to turn against me and so did the charts. I got over confident and put too much capital into larger trades in the cannabis sector. Take a look at the cannabis sector charts from a few months ago you’ll see the peak and valley. Anyways, I ended up calling it quits after about 270 trades. By the end of it I had pretty much broke even losing my $15000 profits. This is when trading can become more of a gamble than an actual working system providing income. Perhaps it would have been a different outcome had I been shorting stocks as they dropped but I personally don’t and won’t short a stock, ever.
Wow, did I ever learn a lot in those three months. Thanks to google, my mentors, fellow traders and the twitter crowd I was able to completely teach myself fundamental and technical analysis. I even took a local university course in that time to learn more about trading. It was basically a three month education grind. I didn’t make or lose any money really but the knowledge and experience I gained as a trader was well worth the time. Since then I’ve still been trading but I look at myself more as an investor than a “day trader”. For those who have the psychological stamina and adaptability to day trade, I tip my hat to you. I day traded just long enough to know thats not how I want to invest.
The new strategy
Dollar cost averaging. That about sums up my strategy. I’ve already picked the companies that I want to hold long term, you can see them in my portfolio. Right now my plan is to just stay the course with these long term holds adding to my positions slowly over time. I’m adding in small increments to take full advantage of dollar cost averaging. Buying on down days and just holding on up days and I have to admit, so far it’s worked out pretty good for myself. I am extremely happy with the prices I’ve paid for the shares I have now. This makes it all the easier to hold long term as share prices slowly increase over time. Holding long is the plan right now, just letting my winners ride.
A different type of trader
Out of the ashes of my short day trading career has emerged a stronger forged investor that is mentally prepared to weather the storms of the markets and capitalize on opportunities that arise. I watch the news much less for it distracts from the main objective which is to defend my trades, not look for exits. I’ve picked companies that I believe will be here 10 years from now. Thats 10 years of growth, earnings and dividends to feed my portfolio into the golden egg I know it can become. I want to be managing a million in my accounts one day and I believe the best way to get there is to park my money in the best stocks I can find in 2017 and just let them grow. I regularly contribute to my accounts anyways so I’ll just keep using that money for adding to positions or starting new ones. The main point is, I’m not looking to take profits from any of my positions for as long as I can, especially the ones paying me a dividend.
Day trading is difficult…like real difficult. Right now I prefer to just buy what I know I can hold and will use dollar cost averaging in my favour as I continue to make buys.