Fear Causes Losses in Two Ways
Stockscores Foundation for the week ending October 19, 2022
In this week's issue:
In This Week’s Issue:
- Upcoming Events
- Market Outlook – Sellers Remain in Control of the Market
- This Week’s Market Minutes video
- What’s Working Now – Day Trading the IPB Strategy
- Trader Training – Fear Causes Losses in Two Ways
Stockscores Trader Training starts at the end of October with 4 free webinars. Click on the link below to learn more and register for any of these one-hour webinars:
FIND HOT STOCKS AND AVOID BIG LOSSES WITH THESE SIMPLE TECHNIQUES - Saturday, October 29, 10:15 am PT
HOW TO INVEST IN THE STOCK MARKET PROFITABLY - Tuesday, November 01, 6 PM PT
DAY TRADING FOR PART OR FULL TIME INCOME - Thursday, November 03, 6PM PT
HOW STOCKSCORES TRADER TRAINING CAN HELP YOU MAKE STOCK MARKET PROFITS - Saturday, November 05, 9:00 AM PT
The downtrend remains in place for the weekly and daily time frames, making longer term trade entries challenging. We are starting to see some buyers come into the market in the very short term and that could lead to a break of the pessimism. However, until the longer-term downward trends are broken, it is best to in cash and ready to take advantage of bargains when the buyers take back control of the market.
This Week’s Market Minutes video
Lots of volatility in the stock market last week, does that mean we are going to see more of a stock market crash or are we on the edge of a boom? I answer that question, analyze the stock, commodity and currency market and look at the day trade of the week on AGFY.
Click here to watch
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What’s Working Now
Only short term trading is working well right now. Day trading the Intraday Pullback Strategy is delivering gains on most days, provided stocks with abnormal volume and strong liquidity are the focus. For the longer-term trader, shorting breaks of pull ups against the primary downward trend is working on the volatile, market correlated stocks like TSLA.
My swing and position trading ideas are provided with the Tradescores Alerts subscription
My day trading ideas are provided with the Active Live subscription
Trader Training – Fear Causes Losses in Two Ways
Speaking from experience, I have found that most mistakes in trading are the result of succumbing to fear. When I say mistakes, I do not mean losses since losing money on trades is part of trading. Instead, I mean those bad trades that we all take which do not fit in to our trading strategy and plan.
The fear-based decisions that cause us to deviate from our trading rules can be broken down in to two types.
First, the trading decisions that we make because of our fear of losing money. These are usually exit trades; we sell too early for fear that our winner will turn in to a loser. Perhaps we fail to take a trade that fits our criteria because our "common sense" tells us there is something wrong with the trade and that it can't succeed. Maybe we enter a trade later than we should because we want to see the market prove our trading idea correct, only to end up getting in once much of the run has happened.
The second fear-based trading mistakes we make are those that are the result of our fear of missing out. These tend to be on the entry; we take trades that don't quite fit our rules because we focus on what might be, the profits that could happen. It may be that we listen to an "expert" in the media or follow the actions of the crowd and do what the headlines are telling us to do.
Have you ever succumbed to either of these fear-based trading mistakes?
If you are a normal human being, I think it is highly unlikely that you have not. Since they happen to all of us, we need to figure out a solution. Fortunately, the solution is quite simple.
Rather than focus on fear, focus on fact. Make trades based on what is happening, not what you think could happen.
Many have described fear as "future events appearing real". We don't walk down a dark alley at night because we might get mugged. We don't swim in the ocean because we might get attacked by a shark. We don't fly on a plane because it might crash.
When we focus on what might happen, what our fear tells us to do, we typically ignore probability. The probability of getting attacked by a shark is extremely low. Last year, you had a greater chance of dying taking a selfie photograph than by being attacked by a shark. If we focus on fact, we get better results.
This does not mean you should ignore fear. It is there to protect us and, when probability is on the side of the decision, it is best to listen to fear. I stopped flying small airplanes because the statistics showed that it was a dangerous thing to do. I still trade stocks because I have strategies that put the statistics in my favor.
When you trade, take your focus off of your emotion and look at the facts. Develop a trading strategy that puts probability for profit in your favor. Have a process in place to assess the facts and take the trades that meet your requirements. Overcome fear in favor of fact.
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