Tyler Bollhorn, the self-taught "professor" of stock market trading, recently gave his Top 10 list of reasons to quit trading in one of his weekly online commentaries.
It's enough to make a grown trader cry.
Bollhorn is the creator of Stockscores (www.stockscores.com), a sophisticated technical analysis system utilized by the Stockwatch trading site. The seasoned pro trader from Calgary is a straight-shooter who pulls no punches in providing tips that are sure to humble anyone who trades the market.
The irony, of course, with the list of reasons to quit is that if everyone did because they were breaking at least one of Bollhorn's rules of trading, the market would grind to a screeching halt and Bollhorn wouldn't have any sparring partners with whom to trade.
So you can identify your trading sins, here's Bollhorn's fabulous list. To add insult to injury, allow us to introduce you to the traders we've known who routinely break Bollhorn's trading disciplines but refuse to quit.
If you've broken all 10 rules and this reads too much like your biography, don't despair. Somebody loves you. Well, at least the market makers love you.
1. If you think you know enough, quit trading the market.
Joe Knowenough (not his real name) represents approximately 90 per cent of traders. Knowenough is that guy who gets slaughtered in the first hour of the trading day, which Bollhorn described in an interview with the Edge as Amateur Hour. Alas, poor Joe doesn't know enough to quit trading.
2. If you don't use stop losses, quit trading the market.
Jane Nostoploss (who represents approximately 90 per cent of traders) does not require stop losses to protect against a major loss because she knows Joe Knowenough and over beers Joe told Jane that stocks only go up after you buy them.
3. If you don't let profits run, quit trading the market.
Pete Singles-Hitter (who represents approximately 90 per cent of traders) has an itchy trigger finger and sells a five-per-cent return before it becomes a 40-per-cent home run play because he has too much pride to leave himself vulnerable to a strikeout. Worse, Pete lets his losses run and doesn't believe in stop losses. Jane Nostoploss is his sister-in-law.
4. If hope is part of your trading plan, quit trading the market. (Bollhorn: "Hope belongs in the church and in the bedroom, not in your stock trading decisions.") Rose Coloredglasses (who represents approximately 90 per cent of traders) is a real trooper. She bought a dog that has no chance of recovering, knows it, but won't face reality. She believes in miracles and won't sell, desperately clinging to hope her mutt can recover for that five-per-cent return Pete Singles-Hitter told her about.
5. If you can't make money paper trading, quit trading the market.
Bob Margincall (who represents approximately 90 per cent of traders) couldn't be bothered by testing his wits in the market before investing hard-earned dollars. When he gets tapped out, Bob rolls the dice, opening a margin account. His investment adviser is Rose Coloredglasses.
6. If you really need to make money trading, quit trading the market - the less you care about the outcome of your trades, the better your trading decisions will be.
Barbie Blowtherent (who represents approximately 90 per cent of traders) idolizes Bob Margincall and throws caution to the wind by speculating with rent money. Consequently, she trades with the emotions of a caged cougar in a game where keeping emotions in check is critical.
7. If you don't see both sides of the argument, quit trading the market.
John Buywithoneeye (who represents approximately 90 per cent of traders) can only see half the picture. His half. He is totally oblivious to the reasons why the guy on the other half of the trade is motivated to sell him shares. When he gets in trouble, guess whom he hits up for a loan? Yup, Barbie Blowtherent.
8. If you use public information to make decisions, quit trading the market - prices change on what the perception of fundamentals will be, not what they were.
Joan Loaduponnews (who represents approximately 90 per cent of traders) shows up at the party after the band stops playing. Which is to say she buys on the news - when the market has already built the news into the stock price. Reminds us of a quote from trader/author Michael Parness, who said: "Last one in the pool swims with the turd.”
Loaduponnews and Buywithoneeye belong to the same investment club.
9. If you don't realize that there is an information bias, quit trading the market.
Larry Lovesanalysts (who represents approximately 90 per cent of traders) figures that if a stock has 10 buy recommendations from the street's cheerleaders (also known by an alias, ANALYSTS), it's a no-brainer buy. Which, naturally, is a no-brainer - in another sense. Larry arrives at the party about the same time as Joan Loaduponnews. They make such a nice couple.
10. If you are afraid of losing, quit the market.
Faith Blindfaith (who represents approximately 90 per cent of traders) can't take a loss in a game where losing some of the battles is key in winning the war - at least, Faith won't take a loss until the dog she's been carrying is put out of its misery (i.e. delisted). Blindfaith is not from the Tyler Bollhorn school of trading. She learned everything she knows about trading from Larry Lovesanalysts.
Unless you're Joe Knowenough, we have a hot stock tip for you. Go to school on Bollhorn's commentary on the 10 reasons to quit. To read this fabulous commentary in its entirety, see the March 12 commentary at www.stockscores.com.
The stock market is a breeding ground for countless trading "gurus" promising to make you filthy rich, but most are pretenders and many are scam artists.
Bollhorn is one of the few who teaches a lost art - common sense.
* SAGE WORDS: "Don't believe everything a corporate official says about his stocks."
- Peter Wyckoff, author of The Psychology of Stock Market Timing
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