In the "Little Book of Trading" author Michael Covel imparts the wisdom of Larry Hite in his chapter "Think Like a Poker Player and Play the Odds." Before I continue, let me just say what a small world this is we live in! When I was performing due diligence on hedge fund and CTA managers for institutional clients in the middle of the last decade, I actually looked at one of Larry's funds. I believe I even had a conference call with someone at his firm.
At that time I had no idea that I would someday be a trend trader just like Larry!
Anyways, in this chapter Larry gives some brilliant advise. The piece I want to focus on today is this gem "The first part of the winning process is evaluating who you are and what you're comfortable doing."
This one rings home with me because this is the first thing any investor should do and it's the most important first step. You must know yourself!
Are you the type that can sit in front of a trading screen all day? Do you have a job to perform besides investing/trading?
What is your personality type?
Are you patient? Cool as a cucumber?
Or are you impatient and impulsive?
Are you a outgoing gregarious person that must always be around others?
Funny thing is until you know yourself, you cannot succeed as an investor!
As an example, I am patient and cool under pressure. However, I am also very process and structure driven. I need to have an investment process! I cannot just shoot from the hip, even though art (not just science) is a part of being a good trader and investor.
"The process" keeps me going despite the fact that a little black storm cloud always seems to follow me around and anything I touch ALWAYS starts out on the worst drawdown in the past 100 years. Therefore I must know through arduous back-testing and process development that the system works, even if it does not work right off the bat (which it never does for me).
Knowing who I am makes me an excellent trend trader. Because a trend trader must know and trust their system and then have the patience to stick with it through both good and bad times.
Maybe you are not a professional trader and would never sit in front of a quote screen all day! Then you need an edge (system or process) that does not take much time implement or learn. You may then be a candidate for managed money or maybe even trade signals, like the ones we deliver here at Stock-Signal.com.
Maybe you love to sit in front of a quote screen and real-time stock charts are like a fancy video game for you. Well maybe then you might have the make up to be a professional day or swing trader.
The website Stock Options Made Easy highlights the various types of investors or traders. The most important thing is that you must know yourself and your ultimate goals.
How about you? What is your make up?