Trader with No Philosophy
To be a successful trader you must have an underlying philosophy. This philosophy is different from your particular style of trading, and it transcends your pursuit of knowledge, the money management techniques you employ, or the psychology you use to control your emotions.
Your philosophy guides you in every aspect of your pursuit of trading excellence. In fact, your trading philosophy may at times seem unattached to your practice, as you may find practical application outside of trading. That’s because trading stocks is not unlike things we do in real life. Your philosophy will help control your emotions, give you the direction and motivation to develop your skills, expand your knowledge, and allow you to make consistent profits.
The Apple Investor Trader Philosophy is captured in the byline of our website — Capital Preservation First, Maximum Profits Second. This is the philosophy of professional traders. The pro is concerned first with the risks of a trade, and how much they could lose. The amateur is concerned first with how much they can make with the trade. It’s a fundamental difference, and it’s what separates the consistent winner from the gambler.
The Apple Investor Trader Philosophy is a risk adverse outlook that uses the Swing Trader style. So how do you avoid risk? Well you can’t completely avoid it, but the swing trader does it by following a set of guidelines that puts them in trades that are close to the peaks and troughs of the trading cycle. In other words, at or near the reversal of trend. And the fortify their trades with confirming evidence. The amount of evidence used to take the trade depends on a trader’s capacity and tolerance for risk. Everyone is a little bit different in that department.
Swing Trader Philosophy
A Swing Trader’s Philosophy can be summarized this way…buy a stock when every investor wants out, and sell a stock when every investor wants in. Sounds a bit contrarian doesn’t it? Bingo! You measure this investor urge, commonly called Bull or Bear sentiment, with a technique called Technical Analysis. Technical analysis is the dissection of stock price charts to illustrate where the peaks and valleys of sentiment lie. Swing Traders rely on other factors too, like economic and industry news and fundamentals, in short anything that can affect the investors sentiment.
A Swing Trader’s Philosophy is very versatile, it can be used in just about any time frame; whether it’s Day Trading, where you’re in and out in the same trading session, or holding for a few days to a few weeks, or like the Position Trader who might hold a stock for several months. The main difference between a Swing Trader and a Position Trader is that the Position Trader relies on fundamental analysis far more than the Swing Trader. This is because the Swing Trader Philosophy believes that stock price moves more on the ebb and flow of investor sentiment rather than a corporate balance sheet.
What’s Your Philosophy?
No one can force you to adopt a philosophy, you can make up your own or adopt a philosophy that is compatible with your style of trading. The most important point is to embrace a philosophy and stick with it.
“No philosophy, no consistency. A man without a philosophy is a navigator without a compass, a ship without a helm, a dog without a fire hydrant. He drifts to and fro, here and there, with no end in view and if he sees one he doesn’t even follow her.” – R. G. Collingwood, Virgil C. Aldrich and Lord Listowel
Philosophy, Vol. 9, No. 35 (Jul., 1934), pp. 262-269
Tagged as: Philosophy