A lesson in Small Cap Stock Picks: The Importance of your Mental State and how it can effect your Trading.

Just about everyone knows that to be a successful trader you have to be a very disciplined person. You can’t be too leanient or your gonna lose to much by not cutting losses or make very little by not selling while you have the profit. Yet a key factor to staying disciplined, is maintaining a sound mental state of awareness and controlling your emotions. Sometimes when certain types of events occur your mental state can become disrupted, which in turn effects your level of discipline, which then in turn effects your ability to trade.

This just happened to me not too long ago. I was in mexico with my girlfriend for my 26th birthday.. everythings good my mental state is awesome, im mean im on a god damn tropical beach in Cancun whats not to be happy about?. I  then come across an excellent  opportunity! And of course im still trading while on vacation. Heres my alert on PCBC which ended up turning into my worst trade of the year.

“Long PCBC 1/2 @ 1.08 as this looks to be breaking its consolidation and on the move here nice chart
…. delayed alert.. still in mexico on very slow wireless connection. Flying back to san diego tonight!”

So im getting back to San diego. PCBC is doing great and im continuing to buy more shares @ a higher price as this just broke out of an extremely bullish chart pattern and this looks set to peak up near 2 bux or so and this is currently my best trade of the year. Im up around $10k on the trade only to wake up the next day and see PCBC gapped down 50% and then some. So i saw a $20k swing on my PCBC position that day going from a $10k gain to selling it for a $10k loss!

Of course i was really bummed out about this its never fun when you get caught in huge gap downs like this. This is about my 3rd or 4th big gap down ive gotten punked by since 2005 when i started trading. So when you get hit like this your confidence is down. Your mental state is altered and this can effect your discipline and essentially your trading as a whole. I have a set guide of rules that i trade by that takes discipline to follow. But after this PCBC trade i had no appetite for any more losses which cost me a huge amount of money, not lost, but potential gained, as i failed to follow my own trading rules due to my disrupted mental state that lead to my undisciplined trading behavior

Shortly after the PCBC trade came two HUGE opportunities. Two of my favorite kind of chart patterns known as “FOUS” patterns that will be fully detailed in my DVD planned for Jan 2011 release. Those two trades were VHC and REE.. Both of which rallied more than 100% each after my buy calls in a matter of weeks. Yet did i make any money? No… I entered both right when i should have. But my lack of discipline to stick to my trading rules made sell both shortly right after i bought because mentally i just couldn’t handle anymore losses after that PCBC trade. I gained very small profit on VHC and sold REE for a very small loss.

Here are my trade alerts on VHC:

Loing VHC @ 7.25 this is breaking a HUGEly bullish chart both intraday and on the Daily chart. Just posted some BIG #’s

Sold VHC @ 7.34 as this just broke down support and the market turning shit into the close i think we head lower from here… out for minimal profit

Blog Post on REE:

REE is the Small Cap Stock Pick you need to see!

My Trade ALerts on REE:

Long 1/2 REE as this is breaking out to all time highs on increasing volume. very bullish here we should see a follow thru to 5 imo: Long @ 4.44

Avg out of REE @ 4.34 as this is breaking down into the close and we cant seem to get a follow through.. ….

Now shortly after i sold both of these stocks way too early they both made HUGE moves. Simply for the fact of lack of patience and discipline to stick to my trading rules and let the charts pan out. I eagerly sold both of them in fear that they would drop and cut my profits and loss short.

The DVD im creating is based around the “Fous 4″. These are the 4 foundational chart patterns that i have identified over the past 6 years of trading that is @ the core of my strategy and can pull some huge returns. Yet if you lack the discipline and are not in the right mental state then you will not maximize your profit potential, or maybe not even profit @ all. In essence. The moral of this story is that your mental state is extremely important in trading. While i was able to identify the right chart patterns to trade. My mental and emotional disruptions prevented my from capitalizing on the 2 largest stock pick calls of the this year that i made for the Black Service Crew. So Stick to what you know works, stick to your guns, and stay disciplined and you will be successful!

Whatcha Think Bout That?

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