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Hirschhorn: Stick to Your Shorts

(Video: Market coach Doug Hirschhorn, PhD, advises traders to stick to their shorts for the time being.)

This week’s trading plan should be to stick with your shorts. The top traders on the Street have spent the past couple months positioning themselves for a 10- to 15-percent correction. As their coach, I can tell you it’s rare for these Wall Street titans to be wrong for so long. What does that mean to me? That it’s time to remember three important rules:

  1. Trust your original thesis Just because the market doesn’t respond in the time frame you prefer does not mean your trade thesis is wrong. More times than not, it just means you were early to the party. So stick around because it’s about to get good.
  2. Patience is the key to bigger profits When the market starts to sell off over the next few weeks, don’t rush to buy back your shorts and take small profits, like everyone else. If you’re looking for that 10- to 15-percent sell off, have the patience to stick with the trade and endure the pains that precede your gains.
  3. Stay objective Forget about how long you’ve had the trade on. When the market starts to sell off, ask yourself one simple question: “If I had no trade on right now, what would I do?”

That’s what I call calibrating your trading mindset. If you want to trade like the elite, you have to think like the elite.

Think better, invest smarter.

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Doug Hirschhorn is the chief executive officer of Edge Consulting, a firm specializing in “Peak Performance Coaching.” He holds a Ph.D. in Psychology with a specialization in sport psychology, and has offices in New York and South Florida. His client list includes elite athletes as well as many of the largest banks, hedge funds and financial institutions in the world. Doug's new book, 8 Ways to Great (Putnam, 2009) is currently available on Amazon.com for $19.95.

Have a question for Doug? You can reach him through his Web site, DrDoug.com

Disclaimer: Doug Hirschhorn's expertise is in the psychology of achieving peak performance. He is not a financial advisor and does not make trading or investment recommendations or provide trading or investment advice. He is an expert on the mental game. Although Doug Hirschhorn has a Ph.D. in Psychology with a specialization in sport psychology, he is not a licensed psychologist and does not provide therapeutic, clinical or counseling services.