Saturday, November 07, 2009

The Fear Of Missing Out



One common problem that I think many traders have is the fear of missing out. I know this is a problem because this is something that I myself have learned to deal with over the years and even now I still jump the gun because I fear that I will miss out on a potential move in the market.

One way to overcome the fear of missing out is to have a well thought out trading plan with specific rules for entry and exit. By having clear rules that you have researched thoroughly on past data, you will take some of the emotion out of trading and your confidence will also increase.

One problem that I see myself doing quite often is that I tend to jump the gun with my entry. For example, if my system says I should enter the market when the moving averages cross on an hourly closing basis, I tend to enter before the hourly close because the market may be moving rapidly in the anticipated direction and I fear I will miss out if I wait for the hourly close. This almost always causes me to enter prematurely and it usually costs me money because the averages never actually crossed on a hourly closing basis. What has helped me overcome this tendency to jump the gun is to not watch the markets until a few minutes prior to the hourly close. So for example, if I have a watchlist of stocks I am looking to buy on the 60 minute time frame and my entry is a crossing of the moving averages, I will scan my list of stocks at 9:55. 10:55, 11:55 12:55...etc. By doing so, I will not be tempted to enter the market prematurely.

If your system is to enter the market based on the daily close, it might be helpful to watch the market during the last 15 minutes of the day so you can scan your watchlist of stocks that are setting up for a potential trade. By waiting for the last 15 minutes of the day you avoid tempting yourself from entering the market during the day.

So there you have it. By having a well written trading plan for entry and exit and by limiting your time in front of the computer, you can help overcome some of the fears you may have of missing out on a potential move in the market. This has helped me a great deal and has also reduced much of the stress I was experiencing. I hope this helps you as well.

11 comments:

Sean said...

Thanks, Kevin. I've been following you for awhile and just want to thank you for your insights and sharing the fruits of your labor.

May I ask a practical question (or three)? How many stocks are you tracking on an average? How often do you run your scans? Does a trader need more than one screen to do his daily work?

Again, many thanks!

Sean

Kevin said...

Hi Sean,

I track all the major ETFs and I run my scans every night. I don't day trade but I look to catch trades lasting from a few days to a few weeks. In addition to the ETFs I also watch about 20 stocks that have good volume and a decent average daily range.

Kishore said...

Hello Kevin

I keenly read all of your postings as your insight is often very very informative. You mentioned about the major ETF's and a list of stocks, would it be possible for you to share the list of ETF's as they mimic the respective markets very well. Thanks for sharing your knowledge...

Anonymous said...

How do you feel about the current overall market ( S&P ) short term Kevin ? As of Friday I have been using USO with 39 ( leading indicator) as a way to now start accumulating energy stocks . I am also long the u.s.$ and feel its possible the market could get a suprise with it .
Thanks for your site and your effort .

Mike

Anonymous said...

What about using the vix as a leading indicator . On the next leg down which hopefully shows a higher low , maybe then is the time to start shorting ? what do they say , when the vix hits a low its time to go when the vix is near its high its time to buy ?

DG said...

Do you want to comment on Treasuries since TLT has broken down from the channel you drew a little while ago? Are shorting them or long TBT, and if not why not?


DG

Anonymous said...

Hi Kevin,
It would be interesting to hear what you think about mechanical systems. Some people say market change and such system can't work forever, but I believe that some things never change and systems based on those properties of the market will always work. What do you think?

victorberry said...

Kevin,

In light of Martin Pring's latest video alert, you might want to address the ramifications of a possible long-term downward price move in TLT with regards to the bond and equity markets.

http://www.youtube.com/watch?v=7rM0Me-BfR4&feature=channel

Kevin said...

Hi VicrorBerry

Good stuff, thank you!

Anonymous said...

Victory

THere is mention of another site , prim.com , however I believe I have the spelling wrong, do you know the correct web page ?
Thanks

manojsai said...

gret insight.
i think your best ever chart was when you predicted the financial collapse in 2008 based on overlapping bond yield with stock index...

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