It’s nice to be able to sail to destinations on calm waters, but you can’t control the seas. When not on shore and rough waters appear the best a sailor can do is navigate safely through them. Experience, skill and execution of the process needed to achieve that goal successfully are vital. The markets are no different for traders.
Times like these reinforce how much I love studying the stock market. Win, lose or draw, I always find myself eagerly looking to garner as much information and knowledge out of every experience I have, both trading and investing, to see how I can apply my ever-growing education to the future. Regardless of wins or losses, I invariably finish each day reflecting on events that have transpired, journaling or writing notes, then preparing to face the next day. Every lesson learned adds a tool to my toolbox. Hopefully each instance leads me one step closer to becoming a consistently good trader and investor.
If there is one thought that is paramount in my mind at this time it’s the importance of having a process in place to deal with any situation the market presents, and the extraordinary swings of the market during the past three months have certainly punctuated that. Drawing on the benefit of hindsight, think of how many instances in the market where if told the outcome in advance you would have said, “No way is that going to happen”. If anyone said yesterday that 48 points would be heaped on top of Wednesday’s 40 in the S&P who would believe it? Yet if you happened to be positioned improperly for it without a process to get you out of danger then there’s little left to do but be steamrolled. Being firmly long or short at any given wrong time under volatile conditions can be a recipe for a quick disastrous outcome.
I know I can forecast all I want, but I can never predict. The only real control I have is in how I act and react, and a process sets the parameters in which those decisions are defined. Having a process that defines risk and takes emotion out of the equation when navigating a stormy market is perhaps the best lesson I’ve learned to date.