Trading for Dollars, Not Pennies

Why your trading can change for the better by adopting a Dollars, not Pennies mindset in 3 minutes or less.

I’ve written about this concept multiple times over the past week but wanted to dive deeper into the importance and actionable pieces surrounding a Dollars vs. Pennies mindset.

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Here is Mark Minervini (2x US Investing Champion) talking about an ‘easy dollar’ environment & how he uses this term rather than a ‘bull or bear’ market.

Mark Minervini @markminervini

Instead of bull or bear, I like to characterize the market as hard penny vs. easy dollar. My rule of thumb: reserve aggressive trading for easy dollar environments. While the market has improved, I would still describe this market as fighting for pennies vs. dollars coming easy.

Mark has been vocal about how adopting this mindset benefits his trading. When it is an easy dollar environment, meaning you can make large progress on your account quickly, he is very active.

When the environment is poor and it feels like he is fighting for pennies, his trading is scaled back significantly.

In this sense, we would all benefit if we could train our minds to act a little more like Mark’s.

How to Know if the Market is Easy Dollar or Hard Penny

An easy dollar market can be identified by the following characteristics:

• Multiple stocks are breaking out and holding gains to the upside

• Leading groups are clearly under accumulation

• Major indexes are above their uptrending 10/21EMA’s

If the above 3 things are true, it is likely account progress will come in bunches and the environment is easy dollar.

Tom Basso (veteran trader) eloquently gives another perspective on the importance of stepping back and looking at the bigger picture. Do you want to focus on only two dollars (a pennies mindset) or a $90+ dollar gain?

Tom Basso @basso_tom

@billygrow3 @CZetaTrader @VanTharpInst @BearBullTraders @TedHZhang @GregDuncan_ If you’re buying a stock at 10 on the way to 100 over next two years, an entry of 11 or 9 will not matter much.

Guage Your Dollars vs. Pennies Mindset With These 2 Questions:

Question 1: Are your best setups working?

The point is this: if your best setups are working, it is likely that you will start to make serious progress on your account.

If your best setups aren’t working, it is best to sit out and not fight for pennies.

Question 2: Are you trying to catch a top or bottom?

This is the most important question to ask yourself once you can decipher if the environment is conducive to your strategy.

If you catch yourself holding on to a stock because you are trying to squeak ever cent out of it, you are in a pennies mindset. Instead, listen to your well-defined sell rules and focus on the big picture.

If you notice yourself trying to catch a bottom and ‘get in early’, you have a pennies mindset. Instead, take a zoom out and understand that if there is a trend, you don’t have to be first in to make a killing.

I hope you can attack this week with a new and improved dollars mindset.

Good luck and talk to you all this weekend.