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Planning Your Dive and Diving Your Plan - Trading!
A colleague of mine just returned from a scuba diving trip inCozumel, which just happens to be one of my favorite places todive. Anyway, she was telling me about an unexpected difficultyshe encountered while swimming around the corral reef down about85 feet. It wasn't anything serious but her story reminded me ofsomething my scuba instructor used to say over and over again."Plan your dive, and dive your plan". When you're down about 90 or 100 feet the nitrogen acts on yourbody in a way that's not too dissimilar to having one drymartini on an empty stomach. It's called Nitrogen Narcosis,Rapture of the Depths, or Martini's Law. So the thing to do isget your planning done while you have a clear head, (i.e. on thesurface). And then when you're deep into it, and you're feelinga bit euphoric, or nervous, you don't have to make any decisionsabout 'what' to do. You just follow your plan. This holds true for trading as well. When you're feeling theeuphoria or nervousness set in, remember to follow your plan.And, uhm yeah,, also have a plan to follow. Clear heads willprevail. Years ago I had the good fortune of talking with a trading gurufor several hours. This individual is world renowned for histrading saavy and skill. What he elaborated in thatconversation had a tremendous impact on me. HE said that whenhe learned how to trade that his family enforced only one rulethat he had to follow. KNOW WHERE YOU ARE GOING TO GET OUTBEFORE YOU GET IN. He felt that the problem that most tradershad was that they felt that this simplicity did not apply tothem. I remember sitting and speaking with him and thinkingabout my own mistakes, primarily letting hope take over in mydecision making. Many traders think that crying "UNCLE" on a trade and taking aloss is unacceptable. Since that conversation I have takennumerous losses on trades but it's funny how they don't have theSTING that they used to because I PLAN MY DIVE and DIVED MY PLAN. This is really simple and incredibly workable. Apply it to yourown trading and investing. -Downjonesfully, Harald Anderson Harald Anderson is the founder and Chief Analyst of eOptionsTrader.com a leading online resource of Options Trading Information. He writes regularly for financial publications on Risk Management and Trading Strategies. His goal in life is to become the kind of person that his dog already thinks he is. http://www.eOptionsTrader.com.
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