The Traders Journal

The Triumph of Catching a Big Move

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Big money is made by being on the correct side of a major market move and executing a carefully pre-planned scenario with conviction. I'll share an example. When I was an MBA student in 1979, Robert Swanson, the founder of Genentech, spoke to my class about an industry that did not yet exist:  biotech. It completely captured my imagination and I followed it with interest, writing down my thoughts and the beginnings of a trading scenario in my journal. My rule of thumb has always been the same:  if it's worth trading, it's worth writing it down. Eventually, I added the nascent biotech industry to my “Investment Radar” folder.

 


In the 1980's when the market was poised to move and biotech was showing accumulation, I moved decisively because I was simply following through on my trading scenario. I had dealt with possible personal execution barriers upfront. I had done the analysis, so there was no paralysis. I had decided specifically how much money I would allocate to this trade, and I had mentally executed the trade a number of times in my mind so I wouldn't stall watching the ticks and somehow lose sight of the big picture. In simplest terms, I was primed to take what the market offered if and when it did. When the market eventually offered a high probability trade, I was there ready, able and willing to take advantage of its largess.

I've deployed a similar approach to what I whimsically label the "Summer Olympic Bias".  Starting with the Seoul Olympics in 1988 and on up thru 2016 in Brazil, the Olympic Committee has had an uncanny investment skill at picking countries that are primed with timely investment opportunities. Check out the history for yourself. I've heard many economists present various theories about why this is so, but nevertheless the four years prior to each Olympics has contributed to a number of profitable scenarios for savvy investors.

More recently, my Radar Folder has been populated with various scenarios in the emerging industry of cloud computing.  Stocks such as RAX, EMC and CRM have danced nicely. My point is this: if you are prepared with your bullish scenario beforehand, you are better able to execute profitably when the market opportunities present themselves.

Upfront, I'll admit that I choose to play only bullish scenarios. I have a good trading buddy who sees life differently and is adept at playing both long (bullish) and short (bearish) scenarios. Under the mantra of " know thy self", I choose to live life exclusively amongst the bulls. It's purely a lifestyle choice at this point.  I do acknowledge the presence of a bearish market when it rears its head. Since cash has less downside risk, I step out of the market. But those are the times that give me the opportunity to turn around and focus on my "Bear Basket".

 

  • I review my journal and past trades.
  • I tweak my investment routines.
  • I review my trading plan.
  • I stalk future trades by looking for strength amongst the weakness.
  • I paper trade to stay on top of my game.

In closing, I'd like to remind you once again of how powerful a tool your trading journal can become if you commit to making it a regular part of your routine. You should be brutally candid and personal within the pages of your journal, writing for your eyes only. Factoid:  Health studies – both academic and anecdotal – have shown repeatedly that dieters who keep written eating journals lose 50% more weight than those who do not. Perhaps your trading journal could help you make 50% more profits or decrease your loses by 50%, but just as dieters know, you have to be willing to make the commitment.

Trade well; trade with discipline!
-- Gatis Roze

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Gatis Roze
About the authors: , CMT, holds an MBA from the Stanford Graduate School of Business and is a past president of the Technical Securities Analysts Association (TSAA). He is also the co-author of Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). A full-time investor for over 25 years, Gatis has taught sold-out investment courses throughout the Pacific Northwest and beyond since 2000. Learn More

Grayson Roze
is the author of Trading for Dummies (Wiley, 2017) and Tensile Trading: The 10 Essential Stages of Stock Market Mastery (Wiley, 2016). He has worked in the financial services industry for StockCharts.com since 2012, and now serves as the Business Manager for the company. He holds a Bachelor's degree from Swarthmore College. Learn More
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Hello Gatis, Thank you for this article...I have been struggling lately and really need to stay focused, disciplined and keep a trading journal...which is what your article has prompted me to start....I feel I will improve. Kind regards, Karen
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