RF Tip # 1 - Don't Focus on Score

When I grew up, I played golf competively in many junior state tournaments. I practiced alot and learned that golf was 80% mental. Most of the time a golfer will try to go play another golfer; however, in reality they are just playing the course. The best pros in golf make the fewest errors and the same applies in trading. However, one of the biggest errors many competitive golfers make is focusing too much on score. Many golfers try too hard to make a birdie or par and underestimate the chances for a pulled tee shot OB, buried sand lie, etc. When the semi-pro golfer realizes this and makes a bad score, like a 6 or 7, they immediately blowup because they cannot get that score out of their head. In my earlier years I did this; however, I adopted a strategy that took my thoughts away from this. I did one of two things:

1. I just wrote the score per hole down but did not add it up until I was done.

2. Or - I played for "every 3 holes". So for example, (I was a 2-3 handicap in my prime) so I would try to make 13 on every 3 holes. So even if I had a bad hole, I had two holes to get to a sum of 13, for every 3 holes. And if I shot 13 on every 3 holes, I would end up with a 78 and normally finish well (not win but good enough).

So what does this have to do with trading? Alot. Many people try to trade and their "score" is their account balance. The trader gets mad if they lose $200 in an account one day and gets happy if they make $400 the next. The truth is if you do that, I will bet my entire net worth that your account will be at $0 in 18 months. In reality, the account balance is 100% MEANINGLESS. It's not profit until it's 100% cash. What matters is your disipline, strategy, homework, and patience. I mean some may think, well I'll buy it because RF has done the HW, so I'll be good but that doesn't work all the time in essense. I mean if it was that easy, everyone would go buy Buffett's holdings released every quarter and they would be millionaires. Anyways, the point of the story is this:

1. Don't focus on score (your account balance)

2. Instead focus on why you do the trade and try to reduce errors. Every trade you put on, you should try to be able to explain to a person for 10 minutes why you own it and why it's going higher (this is what brokers do). I personally write out my recommendations for certain sectors. I shorted commercial real estate in 4Q08/1Q09 and read over 1100 pages of data and probably wrote out 50 pages that explained my story. Do you have to do that, no, but it gave me a strategy, which was the equivalent of "driving range practice". As a result I netted thousands from it, in a period where the market was down 40-50%.