Feb

27

Cowboy Up! from Steve Leslie

February 27, 2007 |

 On a day like today, one is sure to see the deepest darkest side of the financial markets and the financial pundits. And the bulls and bears are going to choose sides, and start to fight things out in the short term.

Being a veteran of more than 25 years of trading stocks and stock indices and living through the events of 1984, 1987, 1991, 1994, 1997, 1998, and 2001, my perspective is this:

One monkey does not close the show. A big decline like today does not lead to an end of the world or a China Syndrome.

It takes time for sanity to return to the markets on such a day as this. This means that the money will need to be sorted out and there will be continued volatility and big swings for the next several weeks.

Financial shows are in a war mode where they will begin to fight over viewership. Consider this akin to sweeps week at the networks. Financial advice will be ubiquitous. Remember, the more public the advice is and the more readily obtained it is the less valuable. The best bet is to not watch television, particularly the financial shows. Especially avoid the cable news shows. They are in the entertainment business not the moneymaking business.

Avoid all or none thinking. Eliminate Schadenfreude from your thinking. Avoid self-pity. As Bill Parcells says, "you are what you are."

Ignore the nattering nabobs of negativism. They are out there to rubber stamp their careers with one lucky call. Do not help them. Their opinions do not count anyway.

This is where all the practice, mental preparation, training, and professionalism become critical. General Patton would say, "This is where all the training pays off."

Be your own man. Make decisions based on your beliefs and your philosophy for better or for worse. If you had a good plan going into today, chances are it will be a good plan going forward.

Don't change tack. Any sailor will tell you to steer the vessel in the wave and head directly for it. As long as you have power, you have control.

Focus on what you have control of. Manage the trade; don't let it manage you.

Vincent Andres writes:

I ask myself, is it so important to identify the precise stimulus that triggered the market? There was probably one. One little shock, maybe, on one little fissure, which was enough. This is because it was applied at the right moment at the right place. But I'm afraid those remarks are of no predictive value. It is impossible to identify all possible little shocks and all possible little fissures. That's looking for a needle in a haystack.

But the market was in a state such that a little shock on a little fissure could propagate, coming from a microscopic, invisible level and emerging at the macroscopic visible level.

Why was the market in this state? Stress, pressure, tension. How to measure when the market is in such a state? I bet that some physicists have some ideas about this question.


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2 Comments so far

  1. Caravaggio on March 2, 2007 12:16 pm

    ‘Manage the trade; don’t let it manage you’

    Thanks Steve. I kept this phrase in mind through this week’s trading, and it held me in good stead.

  2. Black Tuesday - blogger’s thoughts « the 3500 on March 2, 2007 2:30 pm

    […] And what of my story? The currency markets certainly played a role in adding to the turmoil in the financial markets this week, with the high yielding currencies falling like stones versus the funding currencies. Previously, large moves like this would have drawn me in to the game as a trend follower, but this time around I tried stick to my trading script, taking the advice of Steve Leslie over at Daily Speculations, who said: ‘Be your own man. Make decisions based on your beliefs and your philosophy for better or for worse. If you had a good plan going into today, chances are it will be a good plan going forward’. He also said ‘Focus on what you have control of. Manage the trade; don’t let it manage you’, a phrase which really stuck with me through the week. So, even though I spent many hours glued to the screens, I didn’t allow myself to get suckered in and trade for the sake of trading. I just had to admit that I don’t really have a clear strategy for this type of event. […]

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