This episode is about the importance of contingency plans. Much of this I learned from studying Bill Walsh. I also get into my year end review process and a little bit about the market turmoil right now.
I discuss the current environment in the stock market and the attention the inverse head and shoulders pattern is getting. When this many eyeballs are focusing on something it creates the potential for a lot of fake outs before the real move happens. Planning ahead and running scenarios can be very useful.
I share some experiences of being caught by getting sucked into the crowd. The more work we do the more we get attached and feel we’re right. It’s when a group of more sophisticated investors agree when caution is needed most.
An old lesson came back to bite me in a big way at an inopportune time. Position sizing continues to be my greatest strength and greatest weakness but at this stage of my career the downside of that is less tolerable.
You must determine the point where you are going to exit your trade before you enter. Sometimes the more complex your strategy the more you can rationalize not doing that in your head. You can also rationalize that when you are trading well and it doesn’t seem important at the moment...but it IS!