Framework of how to trade correctly

Write down the reason for the trade, the entry price, the exit price to stop a major loss and a point where you want to take a profit made.  Note dividends and reporting dates for each share you trade.

Do not trade before a major market PRINT (release) and do not panic.

LEVEL 1 — The Groundwork

In times like this, it’s easy to become overwhelmed by the onslaught of recession headlines, complex economic data, and heightened volatility. Processing information and properly executing a trade are learned skills, so Mike shares some things for you to focus on before even beginning the game of investing. “90% of investing is managing your emotions.” Here are a few tips that have helped Mike keep his mind sharp throughout his career as an investment manager: Meditation: Every trader has their own process, but Mike starts each morning with Transcendental Meditation — which focuses on relaxed awareness — before heading to the office. Exercise: Maintaining a sharp mind is key to trading, and it all starts with good health. Exercise helps keep us alert and alleviates stress, allowing for better execution in the face of difficult decisions. Outside hobbies: A strong work ethic is important, but being totally consumed by the markets can be a detriment. Having a hobby that allows you to unplug will keep you feeling fresh and improve your overall happiness. According to Mike, “every mentor I've ever had has impressed upon me the importance of having hobbies, something you genuinely enjoy, that can take your mind off the stresses of work.”

LEVEL 2 — Self-Reflection

Now comes self-reflection. What do you want to get out of the market, what’s your time horizon, and how much are you willing to risk to achieve those goals?   Understanding your own investing psychology — like how your emotions impact decision-making — will help you avoid those uncomfortable moments of panic that almost always seem to end in a regrettable trade.   🔑 Spend the rest of this week thinking about this, and watch the markets without trading. Try your hand at a charting tool, and study the price action of your favorite trading vehicle. See if you notice key levels and patterns, and keep track of where the opportunity to enter a trade (if any) might have been. How would it have played out?

LEVEL 3 — An Expert’s Process

Without an investing framework, you’re simply flailing in the wind — riding the emotional roller coaster of mainstream media headlines. Of course, there are countless styles of trading that all require different types of preparation. For example, fundamental equity investors will need to apply much more individual stock analysis — be it corporate filings, earnings schedules, or valuation multiples — to their daily process. While intraday traders will focus much more heavily on things like options flow and the relevant near-term technical levels like opening range and closing price. As a discretionary macro trader, Mike makes decisions based on global macroeconomic trends. Notice we said “trader” and not “investor”? Mike typically executes swing trades ranging anywhere from a couple of weeks to several months. “That’s my time horizon. But keep in mind, every investor or trader will have their own way of looking at the world, even if they operate within the same strategy.” Broadly, Mike is focused on 2 things: The long-term view of where trends are and where they're likely headed, and where we are in the cycle within that long-term trend. With that in mind, here’s how Mike proceeds: He tracks macro trends like currency movements and economic growth on a monthly basis and constantly reads research reports and financial news. Once he’s spotted an opportunity within the long-term trend, Mike uses weekly charts to judge how an asset is valued relative to history. Then, he logs the promising trade ideas on a whiteboard for further investigation. Each morning, Mike reviews how those assets and sectors are behaving. “It might sound primitive, but I actually update these manually to give myself the best feel for the market.” If a technical setup fits within his long-term thesis, he knows it’s time to act. “In reality, the acting part shouldn't take that long because I have a well-formulated plan. So when I'm not actively trading, I spend my free time researching those whiteboard theories.”