Controlling My Emotions

I came real close today to pushing that button.  You know, that button that would have added some shorts to my portfolio.  This morning, we got what I believe was positive economic news but the market sold off on the open and continued lower.  The stock market was going down on good news.  Not the norm.  I constantly watch how the market reacts to good or bad news.  Stocks have rallied since March on good and bad news.  But, today it was selling off on good news. 

So, there I was around 10:00 a.m. with the Dow down around 70 and the S&P and Nasdaq underperforming.  Surely, the negative divergences I had written about a couple of days ago would finally mean a down day.  All I heard on television was that the Dow would be down more if it wasn’t for Boeing.  Then, I read that Doug Kass who had called the bottom in March had called the top yesterday.  Then, I read there was over confidence by investors and too much complacency.  Then, I saw that only junk was rallying:  AIG, Citigroup, Fannie Mae, & Freddie Mac.  Everybody was bearish.  We’re definitely heading down.  Here I am with 70% of my stock portfolio invested and the other 30% in cash.  Would I go long or short?  My emotions said to start shorting (just for a trade).  Yet, I had to listen to my own advice that I was giving out on my radio show for the past couple of weeks.  Give the market a chance to breathe.  Don’t sell just because there was one day of weakness.  As I was having this internal debate with myself, I saw some technical indicators turning positive.  Was it going to really rally and finish up.  So, I wrote “WhiteThis is the time for a real rally today from low levels. We’ll see if it sticks. Day traders can go long with a tight stop” on my twitter.

The stock market began to rally and never looked back.  120 points later, the market closed.  It’s 8th straight up day.  My emotions almost made me hit that button.  But, I breathed, sat back in my chair, and trusted what got me here.  It was a lot of things but it certainly wasn’t my emotions.

I have the same emotions you do about trading.  When I’m wrong, I’m frustrated.  When I’m right, I’m on top of the world and feel like the smartest guy.  When I listen to noise, I get distracted and don’t focus.  This is that time to turn off the television (not the radio) and  focus on the economy and the internals.  They are both still improving and at the end of the day, that’s what kept me from hitting that button.

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8 Responses to “Controlling My Emotions”


  1. 1 weezy August 27, 2009 at 5:24 pm

    I started trading in 2005 after college I have been making at least three times more than I make at my job.Trading is taking some time from the job but I love this stuff. Do you think its time to leave my job and trade full time. I will listen to the show tommorrow

    • 2 keggerss August 28, 2009 at 11:35 am

      I wouldn’t recommend leaving your job right now to trade full-time. I’d grab as much money as possible while you can. However, at some point, you might want to consider doing this but I’d make sure you had enough money to generate a lot of income (bonds, etc.), and then use the rest for trading. Hope that helps.

      • 3 bryan August 28, 2009 at 1:45 pm

        very good advice. Karl is right. Build up the passive income account or at leaast 12 months worth of income outside your trading account, and than trade full time

  2. 4 Tom August 27, 2009 at 6:12 pm

    Karl, Dan has been talking a lot about the data out of the ECRI group lately. I went back and looked at the weekly leading index since they started in 1968 and when we have had major moves like this the market rolls overw hen there data starts rolling over. The data has continued to get stronger from ECRI, but you would think it probably is about to roll over. You and Dan keep talking about how this thing can last until the end of the year, but this move off the bottom is almost as big as any move in the past. Doesn’t this worry you all that we could be in for a big move to the downside. Thanks

    • 5 keggerss August 28, 2009 at 11:33 am

      I didn’t say I think the economy is about to roll over. I think it has further to go. I said at some point, it is going to stall out and we won’t get back to a lot of growth like the 1980s & 1990s. I’m very bullish on the economy the next few months.

  3. 6 tom August 28, 2009 at 11:45 am

    Karl, I think you misunderstood me. I was asking about the Weekly Leading Index that Dan has been talking about a lot lately. I looked back at their data versus the stock market since 1968. Looking at their data when the weekly leading index tops out the stock market tops out with it pretty much at the same time. The weekly leading index is at 38 yr highs right now, and the last time we went that high it proceeded to roll over right after that. The stock market sold off 20% when that data peaked. I think the economic data is going to get better from here, but wondering if that is already priced into market now- we are up 50% range now.

    • 7 keggerss August 28, 2009 at 11:52 am

      Sorry about that. Yeah, it definitely could roll over but I think there is so much stimulus, that this economic run will continue……for a while. But, yes, we’re all in agreement that it’ll come to an end and stocks will probably suffer as well.

  4. 8 bryan August 28, 2009 at 1:43 pm

    I believe this is an interesting perspective for Mr. Practical at Miyanville

    31% of Dell sales growth was from government and we must remember that Dell buys Intel chips; now Intel raises guidance. Government spending is almost 50% of GDP now; china is only 35%. Few are discussing why these companies are making revenue expectations and whether they’ll indeed prove sustainabl


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