Have a thesis and an execution plan (not just one)

17 thg 7, 2023

Everyone has an idea of which way a stock or market is going to go. Even if they are correct or incorrect the why matters. Chart analyst focus on the movement of price and behavior of those buying based on the price movement to make short term investment decisions. If you find yourself making an investment without an exit target and confirmation points based on a thesis (STOP!). Write it down what you are doing and why. Or at least think it through. This is true of fundamental investing as well. I have caught myself many times thinking this is going up for x reason, or down for y reason. However, that was too shallow of a justification. It is a good start of a thesis but not a good execution strategy. I believe everyone should have an exit target and confirmation points (or milestones). This methodology can be whatever you make it (complex or simple). I prefer simple. Something like i believe the price of S&P 500 is going to go up today because it is going to continue its upward trend. Great, now how to execute it. What will confirm that thesis is good at this point. For technicals it can be support/resistance lines. So now it is I believe the S&P is going up today to continue its upward trend. Do you have an upward trend line that you can set as support? If so are you buying close to that line and selling if it closes a chosen timeframe chart below it? If so will it be 1 bar, 2 bars, 3 bars closing below the tend before you act? On the flip side. Do you have an idea of how far the chosen stock will go within the day?

The big idea here is to determine these things before you press the buy/sell button. That way right or wrong you had a plan and executed to the plan. You can always go back and see performance and modify that plan so you can hopefully do better and better in the future.