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Navigating the Maze


See the big picture, but pay attention to the path you're on right now


"The less you bet, the more you lose when you win." That's a handy quote I picked up from Minyan Chuck Gall not long ago. We were talking about risk, about the discipline and the process that allows a trader, or anyone involved in speculative activities, to make winning count.

Paralysis. Indecision. Too much information. It all leads to one thing: losing. What is your process? Can you define it? If someone asks, How do you make market decisions? can you articulate your process?

One of the reasons I pursue the long-term losing proposition of following horseracing is because, believe it or not, it helps me keep the process of speculation foremost in my mind.

Last Saturday at Belmont Park I lost $38,000 because I made the decision not to risk more capital. I didn't physically lose $38,000; the money never transferred between my wallet and the window, but the decision not to step up and follow my own process soured one of my small wins.

The less you bet, the more you lose when you win. The small scale of wagering on horseracing helps me prepare for the far larger scale of what I do during the week. Lessons learned on the smaller scale are a bit easier to take than the grander lessons the market teaches us. The market has a way of making the day-in, day-out routine of what we do magnify the minutiae, exaggerating the meaning of every tick, and drawing us into a maze that instead of facilitating our journey becomes a home of sorts.

There's a big picture out there, an illustration of the maze we are required to walk through. Every now and then we get a glimpse of the maze in its entirety. Then we're quickly sent back to the path to try and find our way. My process inside the path is to incorporate the context of the bullish percent indicators to help me find my way. Around every corner lies potential opportunity, but many more dead-ends.

For now, the context is positive and opportunities are available. But sooner or later a dead-end will appear and I'll be forced to reconsider the near-term context. How you react to the dead-ends will determine your success in navigating the maze.

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No positions in stocks mentioned.

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