11/17/2025 - How we manage our positions and our risk ultimately shapes our trading psychology. Sound trading process builds a sound trading mindset. Here's an important way in which that happens:
As I've worked on my trading, I've found it helpful to follow the lead of some of the best portfolio managers I've worked with and make a distinction between initial positions that I take in an idea and subsequent positions that get large in that idea. The first position is small enough to weather ups and downs without getting stopped out. There is a stop, but it's not close to the market. The first position is my "investment" in the idea that I've researched. It has a target, but also not close to the market.
The subsequent position is much larger and leverages the initial position once I've determined that the market is rewarding the original idea. It has a much tighter stop and is based upon the market flows that are telling me that the idea is playing out. Thus, if I have an initial long position and the market opens strongly with very positive TICK, I might go with that early strength and set my stop for that added piece (and perhaps the entire position) below the morning low. There is a short-term target for this larger piece based upon the levels that I believe we should be able to take out intraday. Those take-profit levels are entered into the market, allowing me to let the position ride.
What I've found is that, if my ideas are wrong, they're usually wrong pretty quickly. I'm sized smallest at the outset and only get larger once the market confirms my view. That keeps me in an opportunity mindset and keeps my losses contained, even as I pursue significant gains.
The important thing here is not to copy what I do, but to understand that trading psychology is something you can work on by shaping your trading process. How you trade reinforces how you experience your trading.
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11/16/2025 - A measure I have found helpful on an intraday basis is an indicator typically viewed on an end-of-day basis: the number of stocks across the NYSE universe that are advancing on the day versus declining. (On the Sierra Chart platform, the symbol is $NISS). When the market makes a new high or low or tests recent highs or lows, it's worthwhile seeing if the strength or weakness is confirmed across the universe of stocks. Often, the largest stocks are the ones displaying the directional movement, but many shares are not confirming the move. This can also be seen in the NYSE TICK statistic, which will show that a broad range of shares aren't confirming a move by trading on upticks or downticks. Once again, the edge here is finding market participants who will be trapped when the buying/selling is exhausted. Too often, traders are so focused on trend and momentum on the chart they're watching that they fail to look at broader market context and what is happening across market participants who ultimately move markets.
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11/14/2025 - We see with the recent price action in the U.S. stock market a sequence referenced below: The market rises toward new highs (or may make marginal new highs), but a number of segments of the market fail to show meaningful strength. Looking sector by sector, we can see that large-cap stocks (DJIA) made new highs recently, but small caps (IWM) lagged and many sectors stayed below their recent peaks, including the former leaders, technology shares (XLK). This rotation and failure to broadly make fresh highs was a sign of exhaustion and now is playing out in active selling. We will need to see some sign of the selling bringing in fresh buyers before we can think about any resumption of the upside. The balance in the NYSE TICK numbers will give a good short-term clue as to whether lower prices attract higher time-frame, larger participants.
The broader point is that, when we look inside price action, we can detect the first signs of whether a move is likely to continue or reverse. When we look across segments of the market, we can detect whether a move is broadening out or simply turning into a reallocation of existing positions. How we trade needs to be a function of the type of market we're seeing. Updating our perspectives each day--and sometimes within the day--allows us to trade flexibly and knowledgably.
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11/13/2025 - So often, the views we trade start with conviction and end in staleness. We become anchored to our conviction and thus become less able to pivot when markets change. A great trading process is to look at what you're trading with fresh eyes daily. For instance, I recently transitioned to a small short position in the S&P 500 index market. During the day and especially at the end of each trading day, I study the charts of the component sectors of the index, such as technology (XLK), consumer discretionary (XLY), etc. I also study other equity indexes, such as the Russell 2000 small/midcaps (IWM); the NASDAQ Index (QQQ); the Dow (DIA); etc. I use the Barchart website to identify how many stocks are making fresh one-month highs and lows and three-month highs and lows, and I use the StockCharts site to track the number of stocks producing buy and sell signals across various technical indicators. In short, I want to see the market from many perspectives to see if my view is gaining or losing support. In updating my view, I become prepared to hold my position, trim my position, add to my position, or exit my position.
Looking at the market from multiple perspectives ensures that we can adapt to the ever-changing flows in markets. The goal is to prevent your conviction from turning you into a convict. Our views can imprison us, or they can evolve and help us navigate opportunity. A key trading psychology strength is open-mindedness and the flexibility to strongly believe something and to be very prepared to shift that belief.