We come to the market with different experience levels, expectations, and needs. But the one thing all of us have in common is the desire to improve our trading. It doesn’t matter if we are struggling or already pretty good at this, everyone wants to be even more successful than they are now.
The quickest and simplest way to improve our trading is to adjust the way we approach the market. Rather than torment yourself and overthink every decision, ask yourself, “What would a savvy trader do here?”
All too often we fall prey to our impulses and emotions. We love the feeling of a winning trade and don’t want to give up on it. But often that means holding too long and watching those profits evaporate. Or we enter into an online argument that makes us even more stubborn and reluctant to admit our mistake. Or we ignore a loss because regret keeps us hoping the rebound is just around the corner.
All of those common mistakes would have been avoided if a person pictured themself as a savvy trader and then made the same decisions a savvy trader would make.
Does a savvy trader brag about his winnings?
Does a savvy trader lock-in worthwhile profits or does he try to squeeze out every last dime?
Does a savvy trader check overnight futures at 3 am because he is worried about his positions?
Does a savvy trader hold losing positions, hoping they will come back?
Does a savvy trader chase the crowd or does he lead the crowd?
Does a savvy trader stay calm and rational no matter what is going on around him?
Does a savvy trader allow a poor trade to affect his mood outside of the market?
Does a savvy trader get discouraged following a loss or does he realize losses are inevitable and calmly move on to the next opportunity?
If you look back at all of your biggest losses, chances are you didn’t do what a savvy trader would have done in that situation. This simple exercise could have saved you a lot of money and heartache. While you cannot do anything about your previous mistakes, it is never too late to use this technique to improve all of your future trading decisions.
None of us are perfect, but it helps us if we aspire to be that perfect trader. Every time you find yourself faced with an important trading decision, ask yourself “What would a savvy trader do here?” Chances are, that is the move you should make.
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Tags: S&P 500 Nasdaq $SPY $SPX $QQQ $IWM $STUDY
Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.