It might be human nature, but it’s not a good thing. In my Tensile Trading seminars, investors study six essential stages of stock market mastery before they ever arrive at Stage #7 – Buying. This foundation building is imperative if investors expect to achieve consistent profitability, but it takes some convincing.
Human nature makes investors want to take action by buying stocks prematurely. When investors in my class finally reach Stage 7, they’re invariably relieved to be at the point where they can finally buy something. Being able to say “objective achieved”, they all too often want to rush off and look for more equities to buy. That is human nature, and therein lies the downfall of many a great trade.
I may sound like a strict schoolmaster but an insightful stock buy without a well-timed sell is like a one-handed clock. It’s like yin without yang, Batman without Robin. The reality is that there’s an all-important stage in between buying (Stage 7) and selling (Stage 9), and it’s called monitoring (Stage 8). As an investor, you must channel your human nature to remain alert. You cannot underestimate the importance, relevance and bottom line impact of disciplined monitoring, even though so many investors do exactly that and it costs them dearly.
Without careful monitoring, you are just a stock market tourist. Not much different than the oblivious tourists I see occasionally if I leave my office late at night in downtown Seattle. Urban environments can be like the stock market. During daylight hours and if the market is trending upwards nicely on strong volume, it’s generally safe. Being slightly less mindful of lurking dangers should not impact you too much. On the other hand, during the gritty evening hours in the city or when the market gets volatile and begins making lower lows, you can’t wander aimlessly like a stock market tourist, being inattentive to what’s going on around you.
It’s been my personal experience that the investing pipeline to profits runs through careful and diligent monitoring. It’s okay to occasionally drift away from deploying one of your indicators or trading tools. But it’s not okay to let your focus drift and forget to monitor your portfolio.
Vigilance in the city is the price of your safety. Vigilance in the markets is the price of profits.
Trade well; trade with discipline!
-- Gatis Roze, MBA, CMT
Developer of the StockCharts.com Tensile Trading ChartPack.
Presenter of the Tensile Trading DVD, Stock Market Mastery.
P.S. Click HERE for information on my future appearances & seminars.
