InvestorQ : How can I take more responsibility and be accountable for my trades?
Niti Shenoi made post

How can I take more responsibility and be accountable for my trades?

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2 years ago

The first theme you need to be aware is that you need to treat your trading or your investment activity as a full-fledged business. You need to show the same degree of passion, commitment and fiscal discipline that you would show in your own business. Treating the stock markets as a supplementary activity is never a great idea to make money. On the contrary, it is a recipe for making losses. You have no control over whether eventually you will make profits or losses. But by treating your trading like a business, you stand a better chance of being profitable in the markets.

Focus more on strategy rather than on opinion. The legendary Warren Buffet once said that, “Wall Street is the only place where businessmen travel in limousines to seek advice from young men and women who take the tube”. The crux of this quote is that opinions are as worthless as they are available in plenty. As a trader or an investor, your primary focus should always be on your strategy. You are going to win some trades and you are going to lose some trades. What you do when you win and what you do when you lose is what matters. You obviously know the possible scenarios before you go into trade. Try to envisage the possible scenarios and evaluate your trade sensitivity. Have a back-up plan for each possibility. That is the best you can do as a trader and that is exactly what you should focus on.

When you are trading you are living in the real world. Don’t treat it as hypothetical. Trading never was hypothetical and never will be. It is always real as it involves real money and that money belongs to you. There is no point taking a trade hoping that the Fed will hike rates or the RBI will cut rates. Your focus should be more on what happens if your expectation does not materialize. Once you are prepared for the worst, then the rest will following logically.

Take the initiative and move quickly on the losers and move slowly on the winners. Surprisingly, most traders do the contrary. They stay too long on losers and move out of winners too early. The best of traders will only get a few of their trades right and so make the best of it. That is where you have to strategize based on the macros, the risk factors and the use of trailing stop losses. Don’t waste your time over what could have happened!

Always let your focus be directed on that which cannot be controlled. Why worry about whether BREXIT will happen and whether the Fed will announce a tapering of the bond portfolio. Frankly, you do not have any control over either of these events. Your approach should be to get your stock selection right and then have a back-up plan to cover your risk if anything untoward was to happen. That makes your job a lot simpler.

Invest time and energy in reading, analysing and continuously upgrading your skills. You live in a dynamic world where ideas and technologies are changing on a daily basis. Your biggest investment should be on constantly upgrading your skills. To understand some of the new technologies and identify investment opportunities, you need to be very well equipped intellectually. Only continuous learning can be of help!