You Feeling Me?

One of my guilty pleasures this summer is to watch Royal Pains -- a TV show set in the Hamptons about a “concierge” doctor to the rich that is really more about the beauty of the place than the drama of medicine. The show is basically a lighthearted play on social manners that always features what Hedgefund girl calls, “The MacGyver moment” for its lead protagonist Dr. Hank Lawson. That’s when the show’s star Mark Fuerstein (who was actually Hedgefund girl’s classmate at Princeton) uses an intricate combination of common household items to rescue some poor soul from certain death until he or she can be safely transported to a hospital. Needless to say, the suspension of disbelief on the show runs very high.

However there is one part of Royal Pains that caught my ear the other day and surprisingly I found it to be very useful to my trading. Whenever Fuerstein’s character first examines a patient he asks them the same question, “On a scale of 1 to 10 how bad is the pain?”.

I thought about this the other day when K and I were discussing a trade set up and she asked me, “On a scale of 1 to 10, how much do you like this trade?” I had already spent half an hour hemming and hawing about the dangers and possibilities of the trade idea, but after K asked me that question I instantly said 6, realizing that I really didn’t like the trade that much at all. It was a good thing too, because that particular trade idea would have been a loser.

By putting a numerical value on my feelings I was able to quickly quantify my opinion. I liked the result so much that I instantly incorporated it into our day to day trade selection process. Now at BK we follow what I call the three F’s methodology -- Flow, Funda, Feeling. If all three elements line up we take the trade. If not we pass.

This process has really helped to sharpen our analysis and improve our accuracy, as we are forced to become much more precise and accountable in our opinion and therefore do not force a trade just for the heck of it.

So next time before you press the buy or sell button, ask yourself, “How much do I like this trade on a scale of 1-10?”. If the answer isn’t at least a 7 or better, you would be wise to pass on the idea.

Boris Schlossberg

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