As I sit here the night before Thanksgiving, I am reflecting on my trading over the past couple of weeks. I have realized that one major flaw has seeped into my trading. This money eating flaw is over-trading. I have been trading for close to 15 years and it amazes me that this bad habit continues to rear its ugly head. For me it is most prevalent when the market is extremely volatile or immediately after the volatility subsides. There are many reasons why we over trade, especially in this type of market. When the market rallies 400 points, you feel like you should be making more money than you are, so you force trades. The volatility gives you the false sense that the stocks you are watching are in play. And when the volatility stops, you do not recognize it and do not adapt to the current market conditions. There are probably hundreds of reasons out there, but in reality to be the most consistent trader you can be you need discipline and patience.

All week, I have been talking to the younger traders in our firm about waiting for stocks to make their move. Wait for your perfect setup. If you miss the move, be patient there will be another. How have I made consistent money over the past 15 years? Not by banging in and out of stocks. Rather, I wait for my perfect setup and then I pounce. On the trading desk, I like to use the saying “when the stars align” or as one young trader said to me, “When the Bat signal goes off!” Whatever it is for you, there needs to be an understanding that you are not trading just to trade. You are trading to make money. You must use discipline and patience. If you don’t wait for your stars to align or for your bat signal, you will certainly lose money. If you are not seeing it or feeling it, it is better to sit there all day and not make one single trade.

There are many ways to combat over-trading and the lack of discipline. One thing that helps me is reading my rules and goals every morning before the trading day. By reading these rules every morning it subconsciously reinforces them.

One technique to combat this and to keep you in tune with the market, is to always be having an on going conversation with yourself. Constantly ask yourself good questions and of course, try to answer them. What is the market doing? Are we in an upward trend, downtrend, are we in a range? Is there heavy volume going on in the market? Is this a light volume day? Am I making money? Am I churning? What sectors are in play today? What stocks are in Play? What Time of the day is it? Should I be trading at all?

Another must is to always have a plan. If A happens I do B. If C happens then I do D. You need to be prepared so you do not start to over-think and make careless decisions.

Lastly, as Bella talks about all the time, is the technique of visualization. I am a big believer in this, especially in trading and of course, my golf game. You need to set aside time in your day to use visualization to work on your weaknesses and reinforce your strengths. Tonight, I will lay in bed and visualize what I would have done differently this week and especially today. I will visualize how I would have traded aapl (apple) without over-trading. I traded in and out of AAPL close to fifty times today, and in reality, the stars only aligned, according to my system, six or seven times. I lost money in AAPL. When reviewing it in my mind, I will visualize how I could have and should have done it differently; with discipline.

Implement all or some these suggestions and watch how much more consistent you become. Happy Thanksgiving!

Jtoma