Certainly! Here's a checklist or trading plan based on the rules you've provided to address impulsiveness and the fear of missing out when trading stocks:
Trading Plan Checklist:
1. Moving Average Rules
- Trade stocks only when they are above a 120-day moving average (MA).
2. Impulsiveness Control:
Have you checked that you are not making impulsive decisions?
- Are you trading based on a well-thought-out strategy rather than emotions?
3. Fear of Missing Out (FOMO) Control:
Have you checked that you are not trading out of the fear of missing out (FOMO)?
- Are you making decisions based on a rational analysis of the stock's potential rather than feeling pressured to buy ASAP?
4. Risk Management:
Have you identified where your stop-loss will be for this trade?
- Is your stop-loss either a hard stop (automated) or a mental stop (mentally monitored)?
- Have you calculated the dollar amount you might lose if the trade goes against you?
- Have you determined the maximum percentage of your capital you are willing to risk on this trade?
5. Position Sizing:
Have you calculated the number of shares to buy based on your risk allocation and the stop-loss level?
- Is your position size in line with your risk tolerance and the potential loss on the trade?
6. Diversification:
- Have you checked that this stock trade will not allocate more than 25% of your total capital to one sector?
- Is your overall portfolio diversified to reduce risk from sector-specific fluctuations?
7. Review and Documentation:
- Have you thoroughly reviewed your trade plan before executing it?
- Have you documented your reasons for entering the trade, including your analysis and the rules you are following?
- Do you have a clear exit strategy in case the trade goes in your favor, including setting profit targets?
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8. Continuous Monitoring:
- Will you monitor the trade's progress and adjust your stop-loss or exit strategy if necessary?
Remember, this checklist is designed to help you maintain discipline and control over your trading decisions, reducing impulsive actions and FOMO. It's important to stick to your plan and avoid deviating from it based on emotions or market noise. Regularly review and update your trading plan as needed to adapt to changing market conditions and personal goals.
Now back to the human (me)
So, looks like trading coaches might be obsolete (sorry fellow coaches). Well maybe not this one. Last weekend I attended the ATAA National conference in Sydney. One of the speakers was Brett Steenbarger who is currently one of the best known trading psychologists in the world. (google him if you have not heard of him)
He delivered a one hour lecture and about 10 minutes into that talk he mentioned spirituality - trading is a spiritual experience he said. Well, looks like I might not be superseded just yet, for as you all know by now, I agree!
AI can't answer the real tough questions like
How am I really feeling?
What am I doing?
How is my trading affecting my relationships and family?
You get the picture and you don't need a robot to make you human and I bet you have been feeling pretty bloody human in this market!
Until next time
Peter
"You yourself are your own barrier – rise from within it"
The Zen Trader page 96
