Are your fears bringing you out of your profitable runs?
When you are in a good trade, let your profits run. An old saying, but hard
to live up to. It is so easy to listen to all "bears" around, and to
exit the trade to preserve the profit (thus losing the rest of the profit within
the current trade).
The worst bears always refer to old knowledge
Your trading strategy is not telling you to get out. But you hear knowledgeable
experts (normally older economists with a lot of old knowledge) declaring that the
market is going to go down a lot. "IT-stocks are overvalued, they are
going to half soon, they are not worth this much".
Or you get to read
too many of the bearish papers: "If the index does not make 11408 in the
next two days we are going to see a fast down move". With too much
knowledge of that type, your decision might be to get out earlier than your system
tells you to (studying the charts you are able to see that it will signal a
sell if only...). So you get out, and with a good profit which always feels like a
good consolidating thought. This is making it even worse, you are doing wrong, but can show "proof" that it was a good idea.
If you let your fear control you, your profit will diminish
The stock might not go down as the experts says it should. It might continue to go up, and you are at the sidelines watching it go up.
You comfort yourself with the profit you have, and probably with the
knowledge that "it is not worth that much, it should really go down and
not up".
Your knowledge has once again interfered with your strategy,
your second guessing has once again destroyed the statistics behind the
working trading system, and you are missing some of the profit you should have
received if you traded according to your strategy.
Since your system is
based on the fact that it gets a number of big winners, it does not
return the profit it should. If this happens too often, it might not even
stay profitable, specially if you do second-guessing also when the stock
goes down and you "know" that it is going to turn up soon.
Headlines
Never trade stocks without having tested your system. In fact, most trading systems are not profitable if tested over many stocks. Full story...
Do not invest in heating equipment without having compared the alternatives, not only to current situation, but also to each other. Full story...