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Be the Bruce Lee of Trading
When I was wee little lad just starting my Wall Street career at Drexel “Burn’em and Churn’em” we had “The Book”. “The Book” was big fat three ring binder that contained every possible response to any objection that a prospect might make. When we pitched a stock we had to know its story COLD and we had to overcome any objection that came our way. The client never had a chance -- he either bought or hung up the phone -- but in either case we never let him win the argument because we had all the answers.
As a salesperson at Drexel you had to know every possible detail about your stock, so that no question could surprise you. That competence, translated into confidence and ultimately led to sales. Wall Street in the 1980’s was a well oiled sales machine and “The Book” was the cornerstone of its success. I am certainly glad that those Glengarry Glen Ross days are long behind me, but I was just thinking that the idea behind the “The Book” has a lot of value for the modern day trader.
Whether you realize it or not, every time you trade -- it is you against the market. Every time you sell, someone else is buying and betting that you are wrong. Every time you buy, the guy on the other side of the trade is looking to take your money. That’s why knowing every possible detail about your setup is your only true path to long term success.
Retail traders can be generally divided into three groups. Group one is the punters. The “have-a-hunch-bet-a-bunch” is the biggest cohort and they are also the easiest group to beat. They have no clue, no discipline, no structure. They are the rube tourists in a market of thieves. The second group of traders has some sort of set up that they trade but only with intermittent success and discipline as they quickly lose focus and move on to another strategy. This is where most of us fit in.
But then there is a third group of traders. They are the truly elite, because they generally trade one setup and one setup only -- sometimes for years -- and they take money out of the market with enviable consistency of a robot. What makes these traders so good is that they know every possible detail about their strategy. They know when it works well and when it fails. They know which pairs yield the highest accuracy and which pairs don’t follow the pattern. They sometime even know if the setup is skewed to the long or the short side and trade just one side of the market.
This knowledge does not come cheap or quickly. It is the result of countless hours of observations and refinement and it is never ending in its quest for success. The markets constantly evolve and although the fundamental forces of supply and demand don’t change, the slight variations in how they manifest themselves require that traders always stay alert and never rest on their laurels.
Bruce Lee once said, ”I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.” That is what “The Book” was all about and what successful retail day trading is all about as well. Instead of always seeking the “new”, “new” thing we should all take Mr. Lee’s advice and commit to one setup with relentless focus. There are a million ways to make money markets, we just need to find one that works.