Patience Is Key To Great Performance – React To Charts Do Not Predict

by OLIVIER on FEBRUARY 11, 2010

As I mentioned the importance of patience in yesterday’s post I thought I’d expand a bit more on that topic. A perfect example of how important it is to wait until the chart gives you a buy signal isBIM.TO – Baffinland Iron Mines. The chart is starting to build some serious pressure and the rest of the pack in the Iron Ore Sector is looking bullish as well. Still the BIM.TO chart is showing a clearly defined resistance area. It goes without saying that you do make predictions when you analyze a chart. Technical analysis is about gauging odds and evaluating risk. But there is a big difference between making predictions and having the patience to only act when certain criteria are met.

Two things that are very important when it comes to making predictions:

• Predict, but patiently wait for the chart to tell you when to take action.
• Predict, but don’t stick to your predictions when the market proves you wrong.

That being said I am closely watching BIM.TO and the rest of the iron ore stocks but I am patiently waiting for the stock to take out overhead resistance as timing is more important than price:

Up-to-date BIM.TO – Baffinland Iron Mines Chart on my public list.

A few thoughts about my two portfolio positions and ‘patience’. One of my most important trading guidelines is: ‘Be patient with your winners. Be very impatient with your losers.’

Today I added to my winner MRZ.V – Mirasol Resources at 2.50. The stock now has a market capitalization of roughly 100 million Canadian Dollar. I think the stock has the potential to easily reach a 200 – 300 million market cap. I am looking for a price target in the 6 – 8 CDN Dollar range. The reason why I am very patient with the stock though, is its price action. Nothing more, nothing less.

MXI.V – Merrex Gold’s trading behaviour is the exact opposite. Although I originally thought it would outperform MRZ.V the stock has turned into a losing trade. I reduced my position on the way down but instead of simply reducing my position the right thing to do would have been to completely exit the trade. I was patient with a loser instead of being very impatient. My job as a trader is to learn from every mistake and to continually improve and refine trading habits.

Do not predict. Simply react to the chart’s message.

Have a great evening!

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