In the markets, just as in life, we usually end up finding what we go looking for. And the problem with most traders is that they're seeking the rush of speculation. They like to buy and sell investments more than they like to make money.
The investment newsletter business and most financial TV shows are built around this undisputable fact. Stock tips are the market's glucose: there's an inherent thrill, even with small dollars at stake, in buying a stock and watching it rise or fall. Like the alcoholic who can't have just one drink, we seek out that pleasure over and over and over again.
But making money in the markets doesn't come from trading. There's no correlation between the number of transactions and how much money one makes. In fact, it's the holding, not the trading, where the money is actually made.
Yet holding a winner isn't very exciting at all, which is why so many of us loathe to sell when we should. We buy a stock and it rises, and the moment the profit exceeds the cost of a McDonald's value meal or even our own commissions, we grab the gains, content to snatch a "win" -- any win -- and move on to another exciting score.
And while every trade could be an opportunity, it's most certainly a risk: each new idea is one that has the potential to blow up in our face. This is why an existing, winning and open position (the kind we tend to mistakenly trade away) is incalculably more valuable than a new pick. Profitable trades tend to stay profitable, while untried speculations are always more of a crapshoot.
For the undeniable thrill of buying and selling, there's eBay (EBAY), Craigslist, online poker or small-stakes foreign exchange. But if profit, not excitement, is your goal, experience suggests its permitting winning ideas to play out, as opposed to trading them away, where the actual money is made.
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