This past week or so has been great for momentum traders. It’s finally nice to see growth stocks breakout consistently and move higher. I have a friend that I talk to regularly who trades similar to me. We exchange ideas, talk about charts, etc. Here’s a quick story with a HUGE lesson behind it.
About 10 days ago, my friend got into a big fight with his girlfriend. He was invested in the market, but sold all his stocks because he was so frustrated from the fight. I told him: What are you doing? For the past 6 months, our style of trading has been challenging and I’m finally seeing signs that it’s back to working again. Forget this girl and get your head straight! This is THE WORST time for you to get out of the market.
He didn’t care. Not only did he get out of the market, but even worse, he went short. As the market started to climb, he wouldn’t cover and kept shorting. I felt bad and really encouraged him to take a couple of trades that I was making. Still, he wouldn’t listen to me. I gave him 2 stocks that each went up over +20% and 1 option trade that went up +300% and he didn’t take any of them. As they say, you can lead a horse to water, but you can’t make it drink.
Here’s the lesson: You can’t do anything in life (especially trading) if your head is not clear. You can have the greatest strategy in the world, but if your mind is rattled and you’re not mentally tough, you have NO SHOT of succeeding. If something is bothering you and stressing you out, you are better off taking a break until your head is clear. Otherwise, I truly believe your poor state of mind will lead you to make bad decisions. What are things you can do to stay mentally tough? I will save that for a future blog post.
As for my friend, he’s still short the market and has lost -15% of his account recently. In the past two weeks, he’s transformed from a sound-minded rational person to a bitter trader that just wants the whole world to collapse…and (according to him) preferably before options expiration this Friday. Stubbornness and leverage is a bad combination. I sent him this video from Rocky Balboa so he can hopefully start to get back on track mentally.