Trade Like an O'Neil Disciple: How We Made 18,000% in the Stock Market

1.13. OVERTRADING

Once an investor becomes seasoned and has developed a winning strategy that he has executed successfully for a number of years, he is still not immune to overtrading. Overtrading seems to plague both novice and expert alike, both in terms of trading when one should just be sitting in cash, and in terms of selling a position too soon, only to buy it back a few days later, then repeating this pattern of buying and selling.

Jesse Livermore wrote of an investor who lived in the mountains and received quotes that were three days old. Only a few times a year would this investor call his broker to place trades. This man was quite detached from the markets, so it came as a total surprise when people learned of his remarkable long-term success in the markets. When asked about his success, the man replied, "Well, I make speculation a business. I would be a failure if I were in the confusion of things and let myself be distracted by minor changes. I like to be away where I can think. Real movements do not end the day they start. It takes time to complete the end of a genuine movement. By being up in the mountains I am in a position to give these movements all the time they need" (How to Trade in Stocks [Greenville: Traders Press, 1991], 32).

Wyckoff echoed this sentiment when he wrote, "When in doubt do nothing. Don't enter the market on half convictions; wait till the convictions are fully matured." Wyckoff continued, "And so, whenever we feel these elements of uncertainty, ...