Hello, my name is David and I have the great privilege of working closely and trading with Brandon, Toni, and Eric each and every day. I will be posting here regularly as well, sharing my thoughts on trading and the market now and in the future.
In the spirit of Spring, I'd like to share a recent commentary I wrote on two great American pastimes: baseball and trading. It's a bit lengthy, so if you're in a rush just skip ahead (but come back later!). Enjoy...
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Any trader friend of mine knows that my love of baseball transcends the game itself for many reasons, not the least of which is for its endless and instructive parallels to another great American pastime: trading.
Now before all you non-baseball fans sensing another boring baseball stat headed your way decide to skip ahead, listen up. You may find this instructive. Last night I heard an interesting statistic on the radio while scanning through countless charts and indices. It concerned the number of “walks” that new rookie batters had achieved since the start of the season. For the uninitiated, a “walk” grants a batter a free walk to first base, and occurs when either the pitcher can’t get the ball over home plate (a disturbing phenomenon when he’s pitching for your team, I can assure you), OR…when the batter skillfully swings only at strikes and lets the bad pitches alone, in essence forcing the pitcher to give him only good pitches to hit. The most skillful batters in baseball are almost always masters at the latter, and in turn rack up a large number of walks during the season. The statistic that I found so interesting last night was this: new, inexperienced, rookie batters had a glaring absence of walks under their collective belts so far this season. Now let’s think about this for a minute. The best among the most experienced batters wait until they get a good pitch to hit. If it ain’t good, they ain’t gonna be swingin’ the wood. Instead, they let the bad pitch pass them by. They wait. And wait. If no good pitches come their way, they do nothing, and if it happens enough times they get rewarded for their patience with a walk to first. Sounds easy enough, right? So why is it that the newer batters have so few walks relative to their experienced brethren? They can’t hit? Probably not. Most likely they can hit the ball as well if not better than the older players in the big leagues. What they don’t seem to be able to do is to NOT hit the ball, or more specifically, not SWING at the ball. Being new to the majors, they have a lot to prove, and tend to lack the cool, levelheaded patience of the great batters. By trying too hard to get hits on pitches that aren’t even close to being in the strike zone, they force the issue when restraint was the muscle they should have been exercising. The very desire to win --to be a winner—undermines many traders new to the market. They swing at anything. They trade too often. In the process, any remnants of confidence they may have once possessed erode faster than the mightiest fastball. Every trader must ultimately learn the art of waiting for the right pitch. In many ways, the market is like a robotic pitching machine throwing pitch after pitch after pitch, most of them being setups of questionable quality and well “out of the strike zone.” It’s the patient trader, willing wait for quality, that typically retains her mental focus, and ultimately swings at the right pitch. Remember the plight of the rookies the next time you find yourself flailing at turkeys. Patience is key. Now get out there and play ball!
(from "Trading From Main Street" daily newsletter) |
