Process, Preparation and then Doing Nothing

• Posted by Greg Harmon
• on December 12th, 2014

Preparation is important. In everything in life. It helps keep you focused and heading towards goals. You write down a grocery list to prepare to shop. You make a Christmas list to share with your friends and family. You study in High School and College to prepare for the workplace. You create a bridal registry before getting married and have a baby shower before your child is born.

In investing, preparation is important as well. There are many styles and levels of preparation. Some determine their preferred mix among asset types. Others look deeper to the fundamentals of individual companies to decide if they are right for their portfolio. Still others look to price action to decide what to buy or sell.

I fall into the later group from a professional perspective. But even then my process is not the same as every other participant in the market that uses Technical Analysis. I wrote a whole book about my process. You may not go that deep into it. But it is clearly important to have a process when investing or trading. That process leads to a plan and defined parameters to move forward.

Once you have pushed through the process and made a plan then you are ready for the next day, week or month in the market. Make sure you write it down though. I like to tell any audience I speak to that Mike Tyson understands process and planning. He is noted for saying “Everyone has a plan until they get punched in the face.” So true. In the market the equivalent of getting punched in the face is being 100% invested and waking up to a 5% gap down day. Did you plan for that? You better.

But a funny thing can happen in markets as well. After all your planning and preparing. Going over things ten times to be ready. You come into the day and everything you planned for set up. You just need a trigger, or a stop level or something to execute. But it never happens. Your triggers do not hit. Your profit targets are still 5% away. Your stop losses do not trigger.

What do you do? NOTHING. This is often the hardest part about investing and trading. Human beings find it hard to do nothing. Traders talk about it as sitting on their hands. Why? because you can not press buy or sell if your hands are under your butt. It is one of the most important tings to be prepared for yet so many cannot do it. Make sure this is part of your process.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

 

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