Saturday, December 19, 2009

Food for Thought from the Sports World

Those of us who have grown up and lived in America have been exposed to many wonderful things. Among them, in my opinion, has been the opportunity to participate in and watch sports. Many valuable lessons have been learned and taught on baseball diamonds, football fields, basketball courts, and boxing rings. Though much of what we have learned may be transferable to our trading, perhaps, unfortunately, some of those lessons as embodied in various cliches are counter-productive.

I believe it was Yogi Berra, the Hall of Fame New York Yankees catcher who once inspiringly said: "It ain't over until it's over." Similar sayings like: "It's not over until the fat lady sings" or "never give up" abound. Parenthetically I should note that the fat lady usually sings before the game, but that's beside my point. We have been trained from early childhood to strive to win and to understand that losing is not a good thing. Leo Deroucher, another baseball giant, once said: "Show me a good loser and I'll show you an idiot." Please don't get me wrong, I make no argument that anyone should strive to lose. I only mean to suggest that some losses in trading are absolutely inevitable.

If we followed the "it ain't over until it's over" philosophy in trading, we might just find ourselves committing a cardinal sin of letting losses run. My point is that we get to decide when it is over in our trades and sometimes making it be over before losses mount is, by far, the best approach. All we need to be successful is to trade in a manner that our winners total more than our losers. We can achieve that through practice, through attention to smart exits, through money management, and through entry only when the reward to risk ratio appears to justify the trade.

"Never give up hope" is another cliche to which we have all been exposed. In the trading world, it is sometimes callously said that "hope" rhymes with "dope" and the winner is the one who takes the early loss rather than hanging on to a losing position with the hope that it will come back.

Michael Jordan the supreme basketball player said: "I've missed more than 9000 shots in my career. I've lost almost 300 games. Twenty-six times I've been trusted to take the game winning shot and missed. I've fouled over and over and over again in my life. And that is why I succeed." It is much the same with the successful trader. She knows there will be losses, but she also knows that patience, practice, and keeping herself in the game (not necessarily in a single trade) can yield fabulous rewards over time.

Maybe Vince Lombardi, famed coach of the Green Bay Packers said it best when he said: "It's not whether you get knocked down, it's whether you get up."

To those of you who have made such kind comments about my books, "Smart Investors Money Machine" and "Trade Your Way to Wealth," my most sincere thanks and the hope that you have found something valuable to help you on your financial way.

by Bill Kraft, Editor
Copyright 2009, Makin' Hay, Inc.
All Rights Reserved

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Anonymous said...

I believe the reference to the singing "fat lady" comes from a tradition in Opera. In other words the Opera hasn't come to the end until the fat lady sings.

- Bill P.

Anonymous said...

Anonymous is correct that "the fat lady sings" refers to the opera, not the person singing the national anthem before the game starts. Furthermore, the "show me a good loser" quote attributed to Leo Durocher was actually uttered by Vince Lombardi. And the correct quote is "Show me a good loser and I'll show you a loser."

Bad memory or shoddy research?

Doug said...

I just wanted to say Thank You Bill!
Your weekend newsletters I get help give me a refreshing start to another week of trading.
I've only been trading for 2 years and unfortunately started in the beginning of the market downturn. I was lucky enough to hit a homerun on 1 stock and just barely got past breaking even. Your newsletters and your books have helped me understand how to utilize the market to make me money. I will continue to try to make money and hopefully start profiting some time soon. All the Best to you and your family over the Holidays!!!

Bill Kraft, said...

Absolutely true about the fat lady, but common usage has now related that to the end of sporting events (erroneously, of course).
Bill Kraft

Bill Kraft, said...

Wow, anonymous, maybe both bad memory and shoddy research, but on whose part? Research, however, it was and the quote was attributed to Deroucher. Maybe Lombardi borrowed it from him; might that be possible? and how important is it, really? Also, the fat lady does sing last at the opera, but in today's world, the saying is often mistakenly related to sports.
Bill Kraft

Bill Kraft, said...

Thanks, Doug. Our best to you, too, for a fantastic 2010!
Bill Kraft