Stick to your Trading Strategy; Stick to your Guns

The following is an excerpt from a chapter called Stick to your Guns from the book “Technical Analysis of Stock Trends” which was written by Robert D. Edwards and John Magee:

“…if you have satisfied yourself that the charts are, for you, the most dependable indication of the probable future course of stock prices, then you should follow explicitly the signals given on your charts, either according to the rules we suggest here, or according to such other rules and modifications as your experience dictates. But while you are following any set of rules and policies, follow them to the letter. It is the only way they can help you.

If you do this, you will have certain large advantages, right at the start:

(a) You will never be caught in a situation where a single stock commitment can wipe out your entire capital and ruin you; (b) you will not find yourself frozen in a market that has turned against you badly, with a large accumulated loss and your capital tied up so that you cannot use it in the reversed trend to make new and potentially profitable commitments; (c) you can make your decisions calmly, knowing also that your losses at the very worst will be limited to a certain definite amount.

All of this means that you will have peace of mind. You will take losses and you will make gains. In neither case will you have to take your notebooks home and lie awake worrying. You will have made certain decisions. If development prove you were right you will, at the proper point, take your profit. And if it turns out that you were wrong, then you can take your comparatively small loss, and start looking for a better situation, with your capital largely intact, liquid and available.”

Although it’s a book to teach you about technical analysis, even the authors knew that knowing the technicals is not enough. They knew if you have a system with an edge, you have to stick with it and give it time in order for it to work.

In the book mentioned above, probably more than 90% is on teaching the different classical chart patterns (which they do a great job of), but in the end it will mean very little if a trader can’t stick to a particular strategy. In other words, in whatever strategy you pick, stick to it.

This was another post on the importance of sticking to your strategy. If you liked it, you can read some more here, here, here and here.

Thank you so much for reading. Hope you enjoyed this post.

Thanks and Regards,

Trading SOS SOS