Trading the markets is basically a solo adventure, and since the markets here in Seattle close at 1:00 PM, it’s nice to break bread afterward with other traders and unwind. I thought my readers would enjoy a brief summary of one such spontaneous unscripted discussion at a recent lunch.
- We opened with an interesting chat about the differences between us professionals and the more amateur investors – or as my friend labeled them “the cocktail party crowd”. First and foremost, we are both motivated to do everything necessary to make money. For us, it’s all about making profitable trades. For amateurs, it’s all about their egos. Most investors first need to get in touch with their motivations and emotions. If you are a hopeless romantic, investing is not for you. Buying stocks is very different than most marriages. You may love a stock, but the stock has no inclination, obligation or need to love you back. It’s nice when they love you back, but don’t expect them to do so.
- Many individual investors ‘talk the talk’ and ‘chart the chart’, but then are unable to ‘trade the trade’. It’s the trade that we both live for.
- It’s nice to keep a bit of powder dry (maintain some cash) but that is not always possible. It’s frustrating when you see an opportunity but have to let it pass because your cash is totally committed. Having cash available and being an opportunist can be very profitable. As the market pessimist, the market optimist and the realist argue about how much water is in the glass, the opportunist can step in and drink it.
- When you short the market, it affects your perspective and even your lifestyle. It’s not a commitment that should be made without serious contemplation.
- Some of our most profitable trades required a large helping of patience, but patience is a very challenging attribute to control, especially for a trader. Patience is definitely what Einstein had in mind when he said the most powerful force in the universe is the miracle of compounding.
- The markets are competitive arenas and, as such they demand a competitive mentality and an ability to maintain that frame of mind. But despite that, we agreed we were “collaboratively competitive”.
With that, I picked up the restaurant check and we agreed to meet again soon – on his card!
Trade well; trade with discipline!
-- Gatis Roze