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Day Trading - Catching The Moment

Here's an idea that you never know what you'll get when you open a trading system. As an investor, you never know what you'll get: an all-American stock that you've held onto, or a company with the worst credit rating you've ever heard of.

Whether you're a novice or an expert, there's one thing you never know when you open a trading system: what you'll get when you close it. I'll give you an example. I've been trading since 1982, and I have never been approached by a client with a stock that he/she found very attractive, but I have closed a very attractive stock. I find these questions very puzzling and interesting. To me, it makes no sense. There's no reason a good idea should make me rich, unless I was born with a silver spoon in my mouth.

With a strategy, if you find yourself in doubt, close the position. If you find yourself in doubt, open the position and let the money build. But that's the dilemma, isn't it?

The other dilemma is: Is it wrong to keep a position open simply because you don't want to let it go? That's what I thought! I also thought: If you didn't close it, where did the money go? To buy something else. But that was a while ago... In short, one day in doubt, no matter what the answer is, is quite another day when the system is working well. The answer is in the system, in the decision to use that system to trade and to buy stocks.

I have learned something of late: A lot of the choices are subjective, or at least subjective in a day trading sense. A good system to trade is like a good idea in the sense that it's an objective quality. Sooner or later, it will happen, and you'll get paid. You'll be able to measure it. You'll be able to compare it with historical data and you'll realize it's better than your initial idea. It's good. But it's not magic. You need to learn to spot it. And you need to be able to admit when it's happening.

You'll not catch it right away. You'll be trading the wrong stock. But you'll be able to recognize what the system is telling you, and you'll be able to take advantage of it when you can.

The key to profitability is: to be able to recognize when the system is telling you the truth. That's one of the most challenging aspects of day trading.

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