Call this column the tale of two lessons ...
Lesson No. 1:
Stress tires you out. Tired people make bad traders.
This was brought home to me recently by my daughter Diana. She had a killer week two weeks ago: an invitational swim meet Tuesday night, followed by a trip to New York with me Wednesday. Then a three-day, end-of-season swim meet Friday, Saturday and Sunday. On top of all that, she was begged to swim in a Saturday morning dual meet for her summer team. A grand total of 11 competitive events in six days.
I'll cut to the chase. By Sunday afternoon she had had it. Unfortunately, Sunday was the day of her premier event. The bottom line: There are few things more discouraging than getting to the last 20 meters in the thick of the race, checking your gas tank and finding there's nothing left. You're swimming your darn guts out, and the entire field is swimming right by you.
Fatigue? No, because the total distance swum during the whole week was probably less than 1,000 meters. For these kids, that's not even a warmup session.
No, the real problem? The stress of trying to perform well in multiple events in a row, day after day, is just too much. You don't feel tired, but you are. And your performance suffers.
Now the reason I bring this up is that I've come to realize I am probably a lot more tired lately than I realize. When I tell my family, of course, they laugh: "Gee, Dad, it must be real tiring staring at that computer screen all day!"
But the fact is, with trading, shuttling kids all over Maryland, writing and the TV show, I have a pretty full plate. Trust me, there's no brain surgery in there, but the constant push to be "on" wears you down.
Of course, it's no different for all of you. Many of you trade full time. Some of you are lawyers. Or sales people. Or police officers. In fact, in this day and age, I'm not sure anyone reading this column is getting a free ride.
And you know what? Half of us are walking around tired. The other half? We're walking around exhausted!
This all came home to me, ironically, after watching Diana swim. This past Thursday, I was looking over my portfolio, and as usual for that week, my longs were taking it on the chin. But instead of calmly assessing the situation, I started to slowly go nuts. Yes, my shorts were holding a finger in the dike, but I was just getting so sick of getting creamed on the long side, I was about a split second away from just calling my broker and selling everything at the market.
Cool, calm, collected? Right -- I was exhausted, crabby and totally stressed out. I was ready to scream, and even worse, commit some terrible, costly trades.
I feel this same way at the end of the day also, and that's why I advocate only looking at charts when you're fresh. I can't tell you how many times I look over my current holdings at day's end and hate every single chart. In addition, I hate every chart that comes up on my scans for the next day. In fact, I HATE TRADING ALTOGETHER!
Sound like someone you know? Tired, stressed out, crabby? It sure fits my personality sometimes.
Therefore, my solution is simple. During the day, I try to fit a nap in somewhere. Even if it's only for 10 minutes, the few moments of downtime are usually enough to recharge my batteries.
At night, I'm trying to get to bed earlier also. (Although, if Nancy and I moved up our bedtime any more, we'd barely be able to fit in dinner!)
I know, all this is small stuff. But I just can't emphasize enough the virtue of trading or looking at charts when you're fully rested. I guarantee you will make bad mistakes when you're not fully charged. Bad, costly mistakes.
As for Diana, she gets one more crack this summer at achieving her goals. She swims against some of the best in the country at the University of Pittsburgh in mid-August. And trust me, she'll be plenty rested before she goes up on the blocks!
Lesson No. 2:
You're human. You'll screw up. Just admit it and move on.
In Friday's column, I talked about how I shorted the
as a proxy for shorting all the tech stocks. Rather than string eight or nine short trades together, I figured I'd just short QQQ for a larger amount, take advantage of the no-uptick rule, and be done with it.
After I went short, of course, QQQ along with the rest of the market staged a little rally on Wednesday. A minor thing really, but with my huge lot size, enough to make me second-guess myself. Fortunately, I still felt the market was weak, and QQQ had hit neither my stop nor my limit target.
On Thursday morning, things looked better, with the Nasdaq a mess. And QQQ started dropping. I was short at 117 1/8 and looking for 111 as my buy-to-cover limit.
And then I did a stupid thing. Thrilled that I had hefty profits when QQQ hit 116, I decided to cover. Why? I don't know. I guess I thought there was support there. Or maybe I had too big a lot size to stay disciplined. Whatever, it was a silly, emotional thing to do.
I realized the moment I covered I was hasty to rush in. And in that situation, I usually beat myself up and curse as the short drops further and further until it hits my target.
But this time I didn't. I tried to treat myself like one of you readers who had asked my opinion. And in that case, I would have said, "If you still think your premise is valid, just get back in. You don't even have to wait for an up-tick."
So, about two minutes later, I re-shorted QQQ. And continued to ride it down.
So, you know what, I'm human. I screwed up. And then I moved on. The fact is, you can always recover by doing something. Even if it's "doing" nothing. But you can never recover by spending the time yelling at yourself.
So, two simple, straightforward lessons, right out of Gary B.'s self-help book. I just wish I read it more often myself.
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at