This Week’s Battle Plan

Last Sunday was quite a day. First, The Sopranos season premier
was as we’ve come to expect…perfect. And second, more
importantly, many of you helped me find Joe
B. In fact, he went from being “missing” to being
“ubiquitous.” He was everywhere!  Live on TV, speaking
at conferences, on a cruise ship with that other smiling bull, Lou
Rukeyser. Yup, you found him. And as the market was sinking four out
of the five days last week, his cheery optimism helped remind us that,
yes, we’ll be at 12,000 by year’s end. 50% returns in 100 days are,
thank goodness, just around the corner.

And third, the most important thing that happened last week, was that
my daughter’s softball team won their opening game 7-1. I thought that
they played very well, especially for the season opener. But, my
opinion means nothing. Not when your daughter is coached by a man who
is obsessed with softball perfection, and has many winning
seasons to back his opinion up. So, while the rest of the parents were
proud of the way our kids played, he was not. And, when the girls
arrived at practice Wednesday night, they got a chance to see two
things: First, they got a chance to see a grown man walk around and
mumble to himself (and to any parent who happened to be cross his
path) that “the girls should have won 70-1, not 7-1.” And second,
they got the chance to be worked harder than they ever have in their
very young lives. Because when you play for a man who not only plays
to win but plays for perfection, the only way you achieve both
is through work. Hard work. And they learned the same thing that the
greatest coach in football taught to his players. Vince Lombardi used
to say that practice is meaningless. It’s “perfect
practice” that counts. And you cannot argue with a man whose
name is associated with perfection when it comes to football.

Move To Trading

So what does any of the above have to do with trading? If you answered
“Go out and buy OEX calls because we are going to 12,000 in three
months,” you may want to reconsider your answer. But, I suspect
most of you know how it pertains to trading. You, like nearly everyone
one else reading this, has been successful in life. You, in fact, are
likely amongst the very successful. And how did you get there? You
worked at it. And you probably worked very hard at it. Certainly
harder than most people. That is why you are successful. And that is
the only way you or anyone else becomes successful at trading. It
comes from work. And the harder you work, the more “perfect”
you practice, the more you will succeed at this game.

The Assignment

I’m intentionally going to keep this piece short this week. And, I’m
going to give you an assignment. Over the next week, “work hard
at improving your trading.” How do you do this? Many ways, and
I’ll name a few:

1. Do you have “written rules” for your trading? If
not, you are cheating yourself. And you are potentially winging it
during the day. I preach this over and over again, and it’s for a very
good reason. It works! Write out your exact rules this week.
The pattern for exact entry, the protective stop rules, and the
trailing stop/profit taking rules is where you start. Then you add the
“nuances.” Re-entries, trading into news, position size, volatility
adjustments and more are just few things to think about. And next
week, I’m going to go into an area of trading psychology that will
further reinforce for you why having written rules is so important.
You will learn about my real life encounter with “Mr. Name On
The Brokerage Firm” and how he impacted my trading because I
did not have my rules written out in the mid-’90s. You’ll see in the
real world, and in a way you could never imagine, just how important
it is to have your rules in writing.

Again, if trading success is your goal, the written rules must be in
place. Write them out starting today.

2. After you have your rules completed, test them and practice
them! How? Nothing in my opinion, is better than to get multiple
years of back data, data that goes bar by bar, minute by minute, day
after day, week after week, month after month, and put it to work.
This means looking for your signal, and then enter the position on
paper and then move to the next bar and ask yourself “what would
I do?’, and then move the next bar and ask yourself “what would I
do?” And if you do this enough, hundreds, and then thousands of
times, you will begin to get into the rhythm of the strategy. And you
will see things you would never have seen had you not done the
exercise. Again, it’s what Lombardi called “perfect practice.”

PS-There are a few more things that may be of interest to you: