Archive for June, 2006
Why Upside Has Been Limited
June 28, 2006 at 8:44 am
Lately we’ve seen occasional bounces with flashes of brilliance (like the June 15th rally which was the best one-day point gain for both the NAZ and S&P 500 since March 2003), but the upside has been significantly limited. Since the major indexes started trending lower back in May, the upside we’ve seen has merely been the flash-in-the-pan type. Why is that so often the case during bear markets?
Consider the speed of the 2 recent market declines. They were both downdrafts where the selling was heavy and constant with no real breather on the way down. Both selloffs came with streaks of 8 consecutive down sessions for the NAZ (5/9 thru 5/18, and 6/2 thru 6/13). Combine these ugly selloffs with the fact that so many participants in the market can’t seem to take a loss no matter when they occur (they aren’t disciplined traders who know when to sell stocks!), and you get the ingredients for persistent pain.
Get A Grip!
June 27, 2006 at 9:38 am
How’s your grip on your emotional swings in trading? Are you able to narrow your focus when things start to go your way? Are you able to walk away (if even for a short time) when you recognize that you’re making mistakes? If a fly on the wall were to observe you during the day or during the week, what would he see when it comes to your self-control over your emotions?
Making and losing money (trading) inevitably stirs up some emotions within us. Whether it’s the pain and frustration of a losing trade stopping you out, the excitement of money flowing into your account by way of that trade you just nailed, or the uncertainty of that new position you just entered, trading can easily put logic on the backburner if you let it.
Like it or not…
June 22, 2006 at 9:35 am
This is the final installment of the Trading & Golf Series. I sure hope you’ve enjoyed reading it, because it’s been good for me to reflect on the endless similarities between these two passions so many of us share. Hopefully you’ve gained something from it as a trader, a golfer, or both!
Maybe you took up trading to make some extra money or start a new career. Maybe you took up golf to pass some free time and enjoy the outdoors in a relaxed setting. Like it or not, you’re going to learn something in them both! The dynamics of each game (and trading is a game) are just such that you’re bound to discover some of your tendencies. The fun part is, you’ll immediately have the opportunity to improve.
Golf and trading both teach us so many lessons about ourselves, and we can apply these lessons to both efforts. We never know what’s right around the corner, and events can easily catch us off guard. Your perfect drive in the middle of the fairway ends up in a divot. Your winning trade gets downgraded overnight. The wind picks up right as you hit the ball, and you never had time to adjust for it. So many things can happen….
But, it’s not what happens to you that counts – it’s how you respond to it.
Respecting the challenges of both golf and trading is part of their appeal. Knowing that significant rewards can accompany improved skills is what keeps us all coming back for more, whether it’s the satisfaction of a lower 18-hole score or a fatter trading account. It’s a process, so strive to find ways which will benefit you now, but more importantly, over the long haul. Stay determined and patient. Work hard. Plan to overcome adversity. And never underestimate the importance of a clear head in both endeavors. Your ability to focus solely on your next shot or your next trade just might start your next hot streak!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Golf, Trading, Trading Psychology[/tags]
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Great Equipment Won’t Make You Great
June 21, 2006 at 9:07 am
Every year in the golf world, newer and better equipment is revealed to make the game easier to play. Sweet spots get bigger, clubs get lighter, the ball goes farther. The problem is that the equipment only improves the results of the player incrementally – it doesn’t give them a great skill. That part they have to “dig out of the ground”, as Ben Hogan said. Trading is similar in that each year, new software and faster PC’s are produced which have the allure of quick and easy profits to the trader willing to purchase them. The fact is, traders are still limited to their own skill levels regardless of if they have the fastest computer or internet connection or trading platform. A 20-handicap golfer will probably only be able to hit that one perfect drive about once a round, so spending $400 on the newest oversize driver to replace last year’s model won’t show him the improvement he’s looking for. He’s far better off spending that same money on something that will improve his process, like taking some lessons or paying for range balls to hit while he tries to groove his swing better. Once he’s able to play more consistently, he’ll be far more capable of seeing a difference with better equipment. Traders can relate to this and avoid paying up for products with every possible bell and whistle available if they lack the discipline to trade consistently to begin with. Upgrade your method first, your equipment later. Odds are it isn’t the equipment causing you trading trouble.
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Golf, Golf Equipment, Ben Hogan, Trading Psychology[/tags]
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Miss ’em Close!
June 20, 2006 at 4:40 pm
In golf, it’s not how good your hits are but rather how well you miss it. Leaving yourself in position to play the next shot is crucial on every hole, and taking chances you can’t afford to take can ruin your score (and bruise your ego!). Trading is so similar, because although we’re going to be right at times, we’ll all be wrong plenty. Successful trading is only partially about your winning trades (hits), but don’t underestimate the power of missing it big. Making a run at that 20-foot par putt after struggling to make the green can easily leave you walking away with double-bogey, compounding an already poor effort. Risking it all for just a little glory or doubling down when you’re wrong in a trade can quickly put you right out of the trading biz!
Instead, why not do your best to minimize pain? Let those losing trades hit your predetermined stop loss, just as you would punch out of the trees to get back to the fairway. Playing for bogey hurts a little, but it won’t kill you. So, accept at the beginning of the day that you might be wrong on some trades. Take your medicine when you deserve it, and live to play (trade) again!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Golf, Trading, Trading Psychology, Trading Tips[/tags]
By the way, subscribing to this RSS feed will mean you won’t ever miss a post!
Grind it Out
June 20, 2006 at 9:25 am
Spending every day at the golf course might have meant lots of long, hot hours in the sun, but it didn’t mean that I had my best game every time I showed up. Some days I just didn’t have it, and there are days like that in trading too. In high school and college, we used to have to qualify for every tournament. If I wanted to make the traveling team (top 5), I’d have to earn it. We would play anywhere from 1 to 6 rounds to determine who would get to travel and who would get left at home, and I can certainly say that I didn’t have my “A-game” every time. Some days I just had to stick to what was working even if it meant I attempted fewer kinds of shots. If the low pull-fade was the shot that was working and a high draw wasn’t in my repertoire, then I played for the low fade! It kept me in the game and made me a tougher competitor as a result.
Trading is similar in that certain plays won’t work sometimes. Breakouts don’t work well in choppy markets, so you have to turn to reversals to make your money. Your bread-and-butter play might not be there for you under certain market conditions, so grind it out by finding another way to profit. Adaptation is the key!
By the way, subscribing to this RSS feed will mean you won’t ever miss a post!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Golf, Trading, Trading Psychology[/tags]
Always Room to Improve
June 19, 2006 at 9:35 am
There is a fine line between being picky and wanting to improve. If you shoot 7-under or make $20k trading on any given day, then obviously there’s not a lot to improve on. But, both trading and golf offer plenty of chances at the end of the day to find ways you could have done better. You could have made that 4-footer on the 8th hole and shot a lower score, and you could have sold your position at the absolute high of the day too. The improvement I’m referring to isn’t of that nature, because rarely (if ever) will we be perfect. Instead, strive to continually improve yourself. If your long game is good, work on your short game and putting. If you’re trading well, double-check your position sizing or expectancy. If you want to be great, expect to pay for it with your time and effort. Bottom line: trading and golf can both be high-maintenance endeavors, so be willing to put in the work to get to the next level.
By the way, subscribing to this RSS feed will mean you won’t ever miss a post!
Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com
[tags]Golf, Trading Psychology, Position Sizing, Expectancy[/tags]
