Three times a day?
In the morning he played basketball, in the afternoon he worked out with weights and in the late afternoon he practiced shooting.
You might say: "What's that got to do with the stock market and trading?"
Well, to be a be a more successful investor one should train too.
Al Gietzen in his recently published book "Real-Time Futures Trading" (Probus Publishing) gives some helpful coaching tips to get an investor in shape. Gietzen is a commodity trader and a faculty member at the John F. Kennedy University School of Management.
"Practice trading is important," says Gietzen. "The musician, the athlete, the artist, even the farmer become good at what they do by practice, practice, practice. And the quarterback doesn't just hone his skills in Sunday's game. However, practice can only be helpful if it's the right kind of practice.
Gietzen goes on to relate that he gathered years of historical data and developed a trading strategy. When he tested it, it worked well. But when he used it, he didn't make much money.
The problem: when he traded his system in practice he cheated - just a little - because he was able to see the charts and data that was coming up.
The remedy: strict honesty in testing a system by not looking ahead of the data when making trades and taking into account commissions and slippage. And obviously, do not use a system if it can not turn a good profit in practice.
Another problem: You trade a system but don't make as much money as you should. This is a tipoff of how psychology is hampering the execution of your system. By subtracting profits in the testing time with those in "real-time" will tell you how much your own psychological weaknesses are costing you.
The remedy go back and cataloge your trades and see where you failed to impliment your system and what was the psychological factors affecting it. Were you greedy? Were you trying to hang on to long to get even? Were you hesitant in buying?
Gietzen advises keeping a checklist near ones computer to make sure an investor is watching his P's and Q's. Some of them are:
In order to improve one's trading behavior, Gietzen advises the use of "guided imagery." By that, he means to mentally practice your trading strategy.
Take time during the day and imagine yourself trading and taking a small loss because that's what your system says. Imagine yourself holding a position through thick or thin because that is what your system is telling you and then making a big profit.
Imagine yourself being confident in trading.
"Guided imagery" is a practice technique used by many athletes to improve their skills. It can also work for traders and help them to defear the demons of fear and greed.
Copyright Ticker Tape Digest August 19, 1996