Morning Market Thoughts
Good morning. It’s nice to be back from a week of R&R in Sedona with my amazing wife. It was restful and rejuvenating. I am pumped and happy to be working again — I didn’t sleep much last night. But I will tell you that it is very important to take time off on a regular basis. Taking a break every now and then helps you “reset the mechanism.” It enables you to gather yourself without the “cockpit trading” that you hear about on that silly Trade Station commercial that just begs viewers to overtrade in the most subtle and devious ways. If you want to sit in a cockpit, join the Air Force. If you want to trade successfully, focus on what matters — and fewer things matter than you probably realize. You don’t need a cockpit, you need discipline. A trading cockpit is noisy.Taking an occasional break clears your head of junk that builds up like stuff in your garage. I recommend taking a week off every once in a while — any longer and it becomes difficult for me to get back in the flow of things. Actually, I haven’t taken more than 1 week off in more than 10 years, so I may not be the authority on the maximum time to rest. A week works for me.
Look, trading is a very difficult profession/avocation. It requires constant adherence to discipline and restraint, which is always challenging. Everyone can exercise discipline for a limited time. Much more difficult to remain disciplined for an extended period of time.
It’s easy to get to the gym in early January because you’ve made a New Year’s resolution to work out more. It’s also easy to stay on a diet during that same time. But are you just as disciplined by Valentine’s Day? Are you still disciplined during March Madness…and April Fool’s Day?
Most are not. Why?
Because discipline requires doing something different. It requires breaking out of established patterns, which requires effort. And breaking patterns, by definition, requires a change in behavior. Most humans are inherently lazy. We get used to a routine. It’s called the “status quo.” And we will go to great lengths to protect that status quo. It is what works for us. Otherwise, the pattern would never become the status quo.
But discipline can ultimately become ingrained in our psyche in the same way as the discipline of fitness and diet. Ask my brother Gary. He is a picture of discipline — in fact, he’s probably just finishing his workout at the gym as I write this — in by 5, out by 6. And his dietary habits are similarly exemplary. He has been doing this for so long that it has become a habit — it is his “status quo.”
Trading requites this type of discipline. And obtaining that type of discipline first requires you to decide exactly why you are trading. Believe it or not, many would rather trade than make money. Their trading routine is established — they trade. Even if the odds of making money are not good, they trade. Even if there is really no opportunity presenting itself, …they trade. They feel that they are not really working if they aren’t trading. Their habit is one of trading, not making money.
Think about it. You don’t make money unless you trade, right? Wrong! You don’t make money unless you trade right! There is only one change in these last two sentences — a comma. But that comma makes all the difference.
If you are trading for stimulation or excitement, making money takes a backseat. Trading becomes an expense to maintain a lifestyle of excitement. Decide exactly WHY you are trading, and then work on the discipline of trading. Over time, you will find that discipline is your new pattern — it is your new status quo. And when you reach that point, you are really a trader. Until that time, you’re just a market enthusiast who likes to trade. Believe it or not, there is a bridge to get from being a market enthusiast to being a true trader who has what it takes to make money.
I work on this every day and strive to help members cross that bridge. But it is a process — a series of epiphanies. Let’s cross that bridge together.
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A couple of news tidbits:
Tesla (TSLA) is up about 4% pre-market on investor enthusiasm about the Model 3 — the new $35,000 model just introduced last week. There are a few reasons for this. First, it is relatively cheap. Hence, more market penetration. Next, the company has 276,000 reservations. Finally, Elon Musk has selective “tweet turets”. When he tweets, it’s for a reason. Last week he posted 68 tweets about the Model 3. As you might imagine, they were all intended to build enthusiasm for the car and augment the details revealed last week.
The stock may continue to move higher, but I think it’s always risky to buy a stock that’s up this much (actually, 5% is my guideline for avoiding chasing). If you are chasing this stock, understand that you have no edge. Everyone knows what you know. Use stops. Also, advance orders are great. But the company makes no money until they deliver these cars, and that could take a while. Tesla doesn’t exactly spit these cars out like a baseball player eating sunflower seeds. It will be a while before they can meet these orders.
Alaska Airlines (ALK) is buying Virgin America (VA) for $2.6 billion. So happy for Richard Branson — he really needs the money. 🙂 No reason to chase this stock — it will trade mostly sideways.
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See you in the forum.
Dan
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