Jim Cramers Real Money Sane Investing In An Insane World
Now fear has set in. But hope is still at play—the unlikely hope that prices will rocket higher just as fast Monday as they fell on Friday. A more realistic hope is that prices will stabilize enough to just get out of the trade without any further damage.
Having a specific plan of action when initiating a trade will greatly reduce, and—the hope is—eliminate, the emotions that can be so damaging to the trader. Know your entry and exit points. Know how much profit you think you'll realize—or how much loss you will tolerate. Then, when you've got your trading plan all laid out and you've entered the trade, don't let emotions change your strategy. Don't listen to what the "herd" is saying. The herd is usually wrong. Calm, cool, and collected traders stand a much better chance at success than do traders who ride all their emotions during a trade. This is where that personal attribute of independence comes in to play.
The answer may also be hidden in the past. Just as the ancients offered an ox or a goat to the gods, you must make a sacrifice. We often refer to it as "swallowing one's pride." One way of doing this is being brutally honest with yourself in your trading journal. Let's say your system flashes a sell signal while you are holding a long position. You override it, only to watch your profits evaporate as prices head lower. In your journal, if it is to be of any real value to you, you must state how you violated your system. Your journal must force discipline upon your trading. If it does only this, it will be well worth all the time and trouble it takes to maintain.
Rich Dad Poor Dad Robert Kiyosaki