This is an important question in trading. You have to know your strengths and weaknesses to constantly improve as a trader and find your niche. Particularly, you must understand your weaknesses. Let me explain as I describe myself.
Who am I? Let’s go with baseball analogies.
I’d describe myself as a power hitter. I can’t hit breaking balls worth a damn, but if I see a fastball up in the zone I’ll blast it 450 feet.
There are clear large moves for us to capitalize on. Moves where an entire sector, industry group or country is set up to run. Moves in under-followed stocks offering textbook price action. Moves out of multi-year bases where major trends just begin. Finding these moves are one of the things I do well.
My other strengths include:
- Identifying major technical events and turning points
- The ability to put the intermarket technical puzzle together
- Being agile enough to move from market to market quickly
I have numerous weaknesses. Here are a few examples that maybe you can relate to:
- I’m a fool for the potential of new technology and ideas. That far-fetched out on the edge stuff that is more hope than close to legitimate reality.
- If I don’t have an awesome entry, i’m vulnerable to selling a great idea too early.
- I’m susceptible to over-trading. (IE lacking patience)
- After a winning streak, i’m more susceptible to hubris/arrogance.
I’ve realized these things for years now. It’s not like they are problems unique to myself. What is unique, is how we address our weaknesses.
Here’s the list again with how I handle these weaknesses.
- I’m a fool for the potential of new technology and ideas. That far-fetched out on the edge stuff that is more hope than close to legitimate reality
- Avoid small stocks with iffy stories that lack sales growth to back it up IE if it seems like a golden meal ticket…it’s probably not
- If I don’t have an awesome entry, i’m vulnerable to selling a great idea too early
- Figure out what is a great trade entry area, get in and let the market do its thing
- I’m susceptible to over-trading (IE lacking patience)
- Only trade stocks in which I have a prior written plan
- Recite trade plans (both ideas and current positions) each night before the market opens
- After a winning streak, i’m more susceptible to hubris/arrogance
- Constantly reminding myself via notes, posters in my office and any other ways of keeping it on my mind. Over time I’ve been able to identify habits and thought patterns that occur when I’m becoming arrogant
In turn, working on these weaknesses builds upon my analytical strengths.
Limiting damage to my psyche and capital allows me to avoid overbearing emotions that hurt analytical analysis.
Also, focusing on quality entries allows me to make bigger bets on my favorite ideas while reducing overall portfolio risk if/when wrong.
Growth spurts in our trading come when we truly understand them and consistently work on them.
Most people are afraid of their weaknesses. Don’t be. Figure out who you are and figure out your weaknesses. If you can’t get yourself to do THAT, then you don’t want it that bad and should probably spend your time doing anything else.
Disclosure: I have no position in any securities mentioned
For inquiries on premium research and coaching for both individual investors and professionals, contact: Aaron@NorthStarTA.com