Use access key #2 to skip to page content.

SharePlanner (< 20)

Don't Trade Stocks Like These Home Run Hitters

Recs

4

September 23, 2011 – Comments (2)

Here are the pictures of three baseball players - you tell me what they have in common?

Here are the Bonds, McGwire, Sosa Pics.

It's probably pretty obvious - first they are considered to be the greatest homerun hitters of our generation. Second, it is "alleged" that they used performance enhancing drugs (i.e. steroids) to assist them in their home run feats. And Finally, their wrecklessness has put them before Congress to testify, and in Barry Bond's case, the possibility of serving jail time.

Now.... tell me what these three legends have in common?

Here are the Ripkin, Ichiro, Jeter Pics

The first of which is plainly obvious - and that is they are much smaller than the other guys, and secondly they've never used drugs to enhance their career.  Not to mention they've never been known for their home run hitting ability, though they are perfectly capable of doing so. Instead they are either in the Hall of Fame, or guaranteed a spot in it. While the previous group, despite over a 1,000 home runs that have been hit between the three of them, will never find their way into the Hall. Lastly, I'd like to point out that Derek Jeter, Ichiro, and Cal Ripkin Jr. are well known for reaching base on a very consistent basis, sporting solid career batting averages, and coming through for their teams when they need them the most. They don't try to outshine their teammates, and they are well regarded in the locker room.

With that said, the question that is expected - what  does drugs, baseball, and homeruns have to do with trading stocks? A lot actually.

Let me explain - far too often, we swing for the fences in our trading, we think that we can buy a certain product that will get our trading to where it needs to be, or we hold on to stocks for far too long, thinking it has more left in the tank.

Here's an illustration as it pertains to baseball. What would you think if the batter at the plate had an 0-3 count (only needing one more ball for a walk) and instead of waiting for a pitch to come right down the middle for him to swing at (i.e. make the pitcher do the work), he starts swing at the next three wild pitches regardless of how close they are to the strike zone and subsequently strikes out. You'd think the guy was an idiot and wonder how he ever made his way into the starting lineup.

But often times we do the EXACT SAME THING in our trading, where instead of taking some gains off the table, or looking to make consistent gains in the market, we instead swing for the fences despite having made a very solid trade (same thing as being up 0-3 in the count and swinging no matter the pitch's location)

Instead you have to be take some balls maybe a strike or two, but avoid swinging at everything that comes your way. If the home run ball comes down the middle of the plate take the swing, but for Pete's sake let it come to you - don't try to make it happen with every trade you take, and that is what so many of us do.

Don't sweat it - I do it a lot of this myself - its hard to be satisfied with just "getting on base" when it comes to trading. We shun our nose at 1% or 2% on a trade, and think its not much to speak of and envision our trades being in the range of 10-20% which is much rarer, and those who aim for those kinds of consistent returns, strike out a whole lot more (just as Babe Ruth). At the end of the day most of us don't have the time frame as traders that it takes to hold a stock long enough for those kinds of returns, or if we are looking for an immediate catalyst, don't spend the necessary amount of time, or even have the resources to discover these kinds of rare plays.

So what I'd like for you to take away from this post, is that if you're frustrated by your trading, if you think you let to many winners turn into losers, or you place trades on the hype surrounding you (be it Twitter or some discussion forum) than ask yourself, in the long-run, are you better off missing out on a few home run balls, for the opportunity to consistently extract profits from this market by taking the gains that you have, and not holding out for the gains you hope for, and of which, is likely never to come your way?

If you're not sure, just ask Jeter, Ichiro, and Ripkin. I'm sure they could tell you.

Check Out Ryan's Trader Network at SharePlanner.com. 

 

2 Comments – Post Your Own

#1) On September 23, 2011 at 3:49 PM, Teacherman1 (57.73) wrote:

An interesting post Ryan, and some good advice, especially if you are a "trader"; but as a "die hard" baseball fan, I do have to point out that you have your numbers reversed.

The "Ball" count is on the left side, and the "Strikes" on the right.

The way you had them, the guy should have been back in the dugout after "striking out", instead of waiting for the next "pitch".

Report this comment
#2) On September 23, 2011 at 6:13 PM, SharePlanner (< 20) wrote:

haha - good point - you know what - I'm not sure why I thought 0-3 instead of 3-0 - good catch. Now if only they'd let me edit my post

 

Report this comment

Featured Broker Partners


Advertisement