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Waiting on Winners Key To Improving Performance


Be patient and wait for the time to be right before selling winners.


I am not much for casinos or gambling, but imagine if I told you that at a specific casino, you would find a specific black jack table where you had better odds than anywhere in the world. Sure you could still lose, but it would far less risky and the payouts for winning were much greater than any other table.

What's the catch? Well, the only thing you must do is walk around all of the casinos and all of the black jack tables day in and day out until I tell you exactly where to go. Could you do it? Would you get bored and decide to sit down at another and just "play small" while you waited? Of course, this is a fictitious example but the parallels between this example and successfully navigating the stock market are not too far off.

Over the years I have learned that there are certain times during a trading year where the moons align and whether your preference is to go long or go short, the odds become incredibly improved and one can make a significant amount of money. The problem of course is that most of the time it is a waiting game and if you aren't ready and sharp when the time comes, more often than not, you will be out of step.

While I don't admire that which I have learned about his personal life, I do seek to emulate many of the strategies and principals of the great Jessie Livermore. One of the things I found very fascinating about him was his incredible ability to "check out" of the market after a big move. He would often travel from New York to Florida where he would board his boat and cruise for weeks at a time. Periodically he would check into the local EF Hutton office for quotes but for the most part he kept far away from the market and the temptation to dabble while he waited for the next move.

This is an area I continue to struggle with, not because the allure of a vacation isn't there. It is because I do a variety of other things that keeps me 'in the casino' and the allure of the tables becomes so incredible. Each year as I sit and review my trades for the previous 12 months, most of the time I see I have traded the big winners for the year and more often than not, I had them very early. This isn't some incredible skill: It is simply the result of hard work and going through thousands of charts, but as I review my trade sheets, I often find that I will sell these stocks after a decent move, but leave the majority of the move on the table. Why is that?

Even though I have yet to do this exercise for this year, I can easily recall some of my trades and am already questioning how I could trade Google (GOOG) from $475 to $500 but leave another $168 on the table. Or how about playing Intuitive Surgical (ISRG) for 10% in the $200's and leave another $130.00 on the table. These two trades alone would have significantly increased my performance for the year. So why didn't I hold them? Oh, and the mother of them all, as I was so kindly reminded by a Tickerville citizen recently: starting First Solar (FSLR) in December in the high twenties and probably scalping the trade for 15 – 20%. Urgh.

While it is troubling to see this, I have found it is common with most traders who have been at this game for a long time and is often passed off with phrases like "No one ever got hurt taking a profit" or "You can always buy it back" when in reality, it should be "Don't sell those gosh darn winners!"

As I analyze my own faults I believe one of my issues is simply that I continue to settle for the other tables where the payouts are small and the odds are the same as anywhere else. While I tend to always find the big winners, I also lump them in with the laggards or those where a 10 – 20% move is outstanding. However, as we start to wind out this year and finish things up, one of the things I am resolving to work on is this issue extensively.

Due to my business and personal obligations, I can't very well get on a boat for a few weeks and disconnect from the market, but there is no reason I can't walk around the casino floor with my chips in hand until the right table opens up. That is simply exercising patience, which I believe is the key to really capturing the monster moves.
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