Using Automatic Stops
In the past couple weeks, I have not been tracking the markets during trading. Instead I have been looking at charts and quotes after the market close.
I guess you could this an experiment of mine to try to totally detach emotional effects from my trading decisions.
Watching the market during the open is marvelous when everything is going up because every time you press refresh, you are $1000 richer (or more). But the exact opposite happens when the market is on its way down. Every time you check your stocks, they are down and it seems like your money is just evaporating away.
It is during both times where your emotions overtake common sense in your trading decisions. Greed is rampant during the bull phase and fear is all there is when the market stays down for a prolonged period of time.
So when you begin to only do your research work when the market is closed, it does help to seperate emotions from your trading because no matter how fearful or greedy you become on any particular stock, you can't buy or sell it because the market is closed!
You then have several hours and often a sleep over your investing ideas and this should allow time for your mind and subconscious to think things over and in the morning you might have a clearer view of reality.
The one skill that you must master if you don't want to watch the markets during active trading is using automatic stops.
I have rarely used automatic stops in the past because I was always watching the market during trading so if a pre-determined stop of mine was hit, I would simply hit sell and that was it.
But today, for example, I was long ARU and it dropped below my stop of $19.47 (determined by the 30 day moving average). However, since I was not watching, I did not sell because I wasn't even aware the price was down.
So right now I want to sell my position but I have to wait until the market open tomorrow which is not good because I won't be surprised at all if the stock gaps down on open.
Making mistakes is good as long as you learn from them and don't commit the same mistake twice. I will set up stops for all my positions and hopefully this will let my profits ride and keep my losses small.