Random Thoughts

With the market choppy and sideways (see chart below), now might be a good time to be patient.

You Better Start Running (?)

"Every morning in Africa, a gazelle wakes up. It knows that it must outrun the fastest lion, or it will be eaten. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn't matter whether you're the lion or a gazelle-when the sun comes up, you'd better be running."
African proverb.

In business, you have to hustle. You seek new clients, serve existing clients, and, in the meantime, deal with the constant barrage of "fires." There are schedules to keep and projects with deadlines. There's always something to do. Whether you're a gazelle or a lion, you'd better be "running." If you're not running, you'll soon be out of business.

Trading is the polar opposite. There's a lot of doing nothing. We're more "wait-ers" than trade-ers. 

Waiting is important, if not THE most important thing that you'll do. You wait for great setups. You wait for triggers once you find setups. Once triggered, you wait, and often wait and wait, for the positions to prove you right or wrong. And then, you go back to waiting.  

The secret to trading is waiting until conditions are conducive to your methodology, pouncing, and then waiting again. It's easy to make a lot of money when conditions are conducive. Keeping it in between is not. When there's nothing to do, it's super hard to do just nothing. It's simply not in your nature.

"Doing nothing is harder than it looks." Ken Lambert

When, not if, conditions sour, your ego will tell you the six most dangerous words on Wall Street: "But it was working SO well!" And, even if you don't succumb to your ego, as a person of action, you'll feel like you have to do something, anything! The problem with taking unnecessary action is that it wears you down mentally and monetarily. If you blow all your monetary or "mental capital" during less-than-ideal conditions, you won't be ready when conditions improve.  

Discipline Gets Used Up

Always remember that discipline gets used up. Have you ever gone to bed thinking, "Tomorrow, I'm going to start working out! I will go to the gym after work! It'll be a GREAT way to work off the stress of the day!" Then, tomorrow comes. Your good intentions get worn down throughout the day. By the end of the day, there's little chance that you'll make it to the gym. There's always tomorrow, you think, but "tomorrow" never comes. 

If you're waiting day after day for conditions to improve, chances are your discipline will get worn down, and you'll start taking mediocre setups (at best!). Again, discipline gets used up. 

Do Your Homework

"When you are in doubt, wait. Fall back on the contemplation of your vision, and increase your faith and purpose; and by all means, in times of doubt and indecision, cultivate gratitude." Wallace Wattles, The Science Of Getting Rich

Being patient doesn't mean doing nothing, far from it. Do your homework, even when it looks like it's going to be yet another exercise in futility. A client once emailed me to say that he didn't see any setups in the foreseeable future, so he was going to take a break from my Trading Service and find something "far more interesting to do." He was right. It had been weeks with no meaningful setups to show for my hard work. I, too, was ready to find something "far more interesting to do." However, since I had other clients depending on me, I knew I had to forge ahead. Ironically, later that day, I found two worthy candidates. Those two stocks would become two of my biggest winners of the year. As I preach, outliers are key. As Seykota sang, "You get a whip, and I get a saw, one big winner pays for them all."

In trading, you must be present to win. This means slogging through charts day after day in less-than-ideal conditions because you never know when the next big winner(s) will come along.

Keep Yourself Busy

As I preach, busy traders make good traders! As mentioned ad nauseam, a client once told me that his trading had improved greatly. I assumed that he was then going to say that he'd been doing the things that I preach. So, "half fishing" for a compliment, I asked, what's new? He said that the doctor covering his nightly hospital rounds quit. Therefore, he was literally working day and night and had no time for mediocre trades. 

My last day job was miserable. I worked at a plant that made transformers. To add insult to injury, the plant was located in BFE. I spent roughly 1 month per year commuting in my car (2+ hours per day, and occasionally, nights and weekends). This gave me plenty of time to contemplate life's poor decisions, especially the one to take this job.

I wasn't the only one miserable. Morale was low both inside the factory and the offices. About once a quarter, "corporate" would come down to inspire us. The speech was always very similar. "As you can see on this graph, in the previous quarter, we lost $300 per transformer we made, but this quarter, we're only losing $250 per transformer (or vice versa). I fantasized about raising my hand and saying, I know how we can save $250 per transformer. Stop making transformers! Oh, where was I? I could see the writing on the wall (and was later proved right), so I had to do something else. 

I didn't want to find myself in another miserable day job, so I decided to take my trading full-time. Since I was profitable, I figured that I'd be much more profitable if I could focus on the markets all day (and night!). I was wrong. To my surprise, I began losing money. Like my doctor friend, while I was busy with my day job, there was no time for mediocre trades. 

Wait For Money Lying In The Corner

 "I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime." Jimmy Rogers

There are times when I feel like Jimmy. There's money lying in the corner, and all I have to do is walk over there and pick it up. Other times, not so much. Again, making money in great conditions is not hard. Keeping it in between is. In the "in between," I often succumb to boredom, trade goads, and the impulse to "shoot anything that moves" (hyperactivity, e.g., day trading). When conditions aren't conducive, I occasionally find myself confusing "intuition" with "into-wishin" (Seykota-ism). 

As I preach, have you ever gotten stopped out of a trade and immediately shouted, "I KNEW I SHOULD NOT HAVE TAKEN THAT TRADE!" (guilty). Conversely, have you ever seen a setup and known you were going to make money with it? True, there's always the potential of a loss, even on the best-looking setups, but you're confident that you've stacked the odds in your favor. And, if you lose money on that "f-yeah" trade, you'd take a similar setup tomorrow without any loss in enthusiasm (my second favorite "asm," my first? Sarcasm!)

In Summary

In life, you'd better get off your butt and do something. In trading, there's going to be a whole lot of doing nothing. You must wait (and wait, and wait) for conditions to become conducive. And, in the meantime, keep yourself busy by doing your homework and other stuff that's far more interesting. 

May the trend be with you!

Dave Landry

The Greatest Sin In Trading (and life)

"The greatest sin is mediocrity.''

Anthony Bourdain

If you desire a mediocre life at best, then be mediocre. Don't strive to be better. Don't learn from your mistakes. Never take credit for your f*ck ups. Blame others. Keep Reading.

A Million Little Things Will Make You A Successful Trader

I've compiled a list of all my "Million Little Things" videos. Watch Videos.