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

4.3. PROBLEMS, SITUATIONS, AND SOLUTIONS

We have been trading for the past two decades. While any trader knows not to make rookie mistakes such as averaging down, the adventurous ride we have had in the markets has given us a deep perspective on what are often overlooked and unexpected reasons why traders get off track. This ride has not come without "tuition costs," which we might better understand as the price of learning. Such tuition costs have continued to be exacted by the markets since some of our mistakes have occurred even after many years of success in the markets, and should be considered "post-graduate" tuition costs!

What follows is a smorgasbord of our mistakes or mistakes we have observed other experienced traders make. We mention the problem, provide a situational example, and then discuss the solution.

4.3.1. Your Trading Strategy Stops Working

Problem: Your strategy stops working for more than a few months, which tests your patience. You start to question your strategy, and may make changes to it that are detrimental in the long run, or abandon it altogether.

Situation: In 2004 and 2005, base breakouts were not working. The strategy that had always worked in the past, that is, buying the best stocks on base breakouts during bull markets then going to cash during market corrections, was not working as it once had. My business partner, who had many years of experience and was an exceptional trader in his own right, believed base breakouts would no longer work ...