Editor's note: This column was originally published on RealMoney on Feb. 5, 2008 at 4:29 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please
- Be patient. Being patient means refusing to trade all but the highest-quality setups, even if that means you wind up doing nothing that day. It's easy to "let the trade come to you" when there are trades coming at you left and right. It is much harder to be patient when good setups are few and far between. But that is what separates the pros from the amateurs. Many times the difference between success and failure isn't in the trades you make but in the trades you don't make.
- Lower your expectations. If I suspect the day will be narrow, then I need to set my targets lower. That sounds logical and obvious, but once we are in a trade, it's amazing how easy it is to fall into the traps of hope and greed. Who doesn't secretly hope against hope that your next trade will exceed all expectations? So it's a constant battle with yourself not to fall prey to emotion but to follow discipline and to exit conservatively on narrow days.
- Go where the action is, but play it safe. There are a few stocks we have been trading lately that have wider ranges, larger swings and more potential for daytrades, particularly on narrow days when other stocks are not offering us much momentum. Among them are Baidu (BIDU), Google (GOOG), First Solar (FSLR), SunPower (SPWR) and DryShips (DRYS). These stocks are very fast traders, though, so I would not encourage anyone to trade them unless they are very good at controlling their trades and their emotions. One moment of hesitation on these can skin you alive, so you must be able to keep your stops.