STOP IT! USING WHAT DOESN’T WORK TO FIND WHAT DOES

By Scott Bruzzi

As traders trying to enter the realm of “pro,” we are always attempting to improve. And we should be!  We are always searching for something new to help us make better choices. Most times, we feel that a new system or tool is all we need. And for many this belief is enough. However for others including myself, there is another issue at hand. For some, it’s not just about learning something new, but about stopping something old. In my early years, my problem was that some of my trade entries worked well. But when they didn’t, it was detrimental and costing me more than I had made. These choices may have been initiated from poor teaching but I drove them in with stubborn abandon.

For example, let’s imagine that you had gone short at the top of the market as it tumbled in 2007 or that maybe you went long at the very bottom in 2009.  Those would have been the easiest trades to manage, with the least amount of heat. (Actually, they would have had no heat at all!)  But guessing the top or bottom as a means to limit risk is one of the most dangerous and costly of all mistakes. But as you may have heard, trying to catch the bottom of the market is like trying to “catch a falling knife”. It's one thing to anticipate a place of turning, but it's another to place orders there. Many of us have tried to use the idea of picking turning-point-pivots as a way to limit risk. I was so good at drawing lines at pivot areas that I thought “Wow!” and did it again and again. Many years ago I could pick pivots of Apple (a $200 stock) within .05¢! I had to finally realize that doing so was actually detrimental to my P&L when I was wrong. Unfortunately, I was wrong enough times to not ignore.

So I began replacing this with the notion that “maybe” I could still enter the party after it has already started; limiting my risk by entering after it’s already begun. The idea was to enter the trend, not predict its ending.  I found this incredibly difficult to do.  I would get in and bail the trade or be stopped time and time again.   It took much longer than anticipated.  I felt trapped in myself!  I continually resorted to what was comfortable for me, picking tops and bottoms!  It’s amazing that we subject ourselves to pain because it’s what we’re familiar with.  I kept studying more on entering at better points with the trend and I kept trying to replace my thinking with these new concepts.  But even still, I couldn't  master the concept. I continued to resort to what I believed in - right or wrong. And pow! I was trapped again.  I am not sure exactly when it finally hit me - that “AH-HA” moment - but words flew into my head…. “Stop it!  Just STOP IT! Forget anything else and just STOP IT! Forget your need to make money!  Just STOP IT!”  Stopping the wrong concept was far more important than starting a new correct one, even if it meant sitting on my hands and not trading at all. When I finally got out of my own way, I began to see the proper entries.  I was no longer wasting emotional capital on dealing with bad trades.  Those bad trades would wear me out and tear me down until I couldn’t even find my way to the bathroom.  It was mentally draining.

Many folks come into our trading rooms with concepts they want to fix. I understand that they have greatly invested time and effort in certain things.  Subliminally they want us to give them a new way to use their concepts.  For many people coming in with this mindset, we show and show and then show some more and we prove and prove and prove again, but they are not quite seeing or trusting the sound methods and systems we use.   They end up blocking new positive beliefs because they will not STOP the one that is in the way. Many reasons cause this.  Fear of the future possibly, or anxiety over your present financial situation. But nevertheless,you can not fix a problem creating a new one. Your exact trading dilemma may not be what I faced all those years ago - and maybe it’s multiple things - and that can overwhelm.  The solution…? Stop the worst of them first.  If it isn’t working then STOP IT!   Begin right now by saying “I will STOP...(your certain problematic concept)........” and again, …...  “I WILL STOP…………!”

If you are losing, but unsure of what you need to stop, then “STOP IT” may mean “live” trading for you.  Now write it down and put it on your screen!

You can overcome your limits and we are all about that here at the Stock Index Trading Room.

You are a magnificent person regardless of your mistakes. (I hope you make that a new belief as well!)

For your success,
Scott

2 thoughts on “STOP IT! USING WHAT DOESN’T WORK TO FIND WHAT DOES”

  1. Scott,
    Thank you very much for your post in March. I identify with
    it toooo much. What I have to realize is even Rob makes bad
    trades; but they are small compared to longer winners. Picking
    tops keeps you from making up for all the entry loses.

    Thanks, Craig

  2. wow. scott. I don’t typically like these sort of articles… but your’s hit me straight between the eyes!! Thanks.

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