Trading Lesson of the Week

Check back weekly for another free trading lesson:

Avoid Fear Based Trading Decisions

In This Week’s Issue:

  • Stockscores’ Market Minutes Video – When to Buy Weak Stocks (Bargain Hunting)
  • Stockscores Trader Training – Avoid Fear Based Trading Decisions
  • Stock Features of the Week – Stockscores Simple Weekly Canada

 

Stockscores Market Minutes – When to Buy Weak Stocks (Bargain Hunting)

Buying weak stocks is like trying to catch a falling knife. There is a simple technique you can use when bargain hunting stocks that have come down in price.

This week, I show you what to look for, do my weekly market analysis, scan the market for opportunities and look at the trade of the week on DPLO.

Click here to watch this week's Market Minutes video

To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel

 

Commentary of the Week – Avoid Fear Based Trading Decisions

Speaking from experience, I have found that most mistakes in trading are the result of succumbing to fear. When I say mistakes, I don't mean losses since losing money on trades is part of trading. Instead, I mean those bad trades that we all take which don't 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 actually 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 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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Past Trading Lessons

June 23, 2019Avoid Fear Based Trading DecisionsT.PTG | T.ELD
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May 27, 2019Overcoming Emotion in TradingT.NFI | AVP
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May 19, 2019Fearlessness in FactsAVXL | BLDP | IIIV
May 12, 2019Traders Must Seek the TruthVXX | UVXY
May 5, 2019No to FOMOOVID | T.BU
April 28, 201915 Core Trading PriniciplesT.REAL | ZYME
April 21, 201910 Ways to be a Better InvestorKEG | CRZO
April 14, 2019How Do You Make Day Trading a Career?PE | T.LUN
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April 7, 2019Gambler or Trader?T.WPRT | T.CJ | T.GTE
March 31, 20193 Ways to Beat the Stock MarketLLNW | ALKS | NM
March 24, 2019Avoid Reckless TradingT.AUG | T.YRI
March 17, 2019What You Need to Know to Trade Stocks for a LivingJAGX | SELB
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February 3, 20193 Ways to Increase Your Trading ProfitsT.ROOT | MLNT | ABEO
January 27, 2019Wait for Great TradesTRVN | WHLR | DTEA | JMEI | AWSM
January 20, 20193 Ways to Improve Trading ProfitsT.BIR | T.CPG
January 14, 20198 Important Trading RulesAPRN | CPST
December 16, 2018Fear or Analysis?SSRM | T.BLU
December 9, 2018There is Strength in Market WeaknessT.ABX | RWM
December 2, 2018Keep Your Standards UpT.AC | T.GIL
November 25, 2018Beat Fear, Beat the MarketTYME | BIOS
November 18, 2018When the Unexpected Happens, Trade!KOOL | SQQQ
November 4, 2018Recent Stockscores VideosMARA | CNCE
October 28, 2018The Early Years of Trading
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October 14, 2018The Behavioral Science of TradingFLKS | GLBS
October 7, 2018Market Scanning for Hot StocksPEIX | BDSI
September 30, 2018Overcoming EmotionsAKER | ETP
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August 13, 2018TradenomicsT.EFX | T.SW | T.CPX
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July 22, 2018The Information TrapT.HCG | XRAY
July 16, 2018Fear or Fact?TLGT | GOL
July 8, 2018What the Ocean Teaches Us About InvestingMCF | DEPO
June 24, 2018Learn from My Trading MistakesAKTX | ZFGN
June 18, 2018Effective Strategy TestingT.NEPT | BLPH | CLSN