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Stock Doc: Stick to Your Guns

Alden Cass

This past Sunday, in the second inning of a baseball game, I stood on first base after hitting a single with two outs.

I play in a wooden-bat semi-professional baseball league in Central Park as a way to relax each weekend. My team was playing against a new and unfamiliar opponent on that day, and I had no awareness of whether the catcher had a good throwing arm or if the pitcher had a good pick-off move. We had a weaker hitter at bat, so strategically I knew that it would be in my best interest to attempt stealing second base.

So after the pitcher went into his motion on the second pitch, I made the decision to take a risk and try to steal the base. Unfortunately, despite my sound strategy, I was just barely thrown out after sliding feet-first into the base. I was told that I probably would have been safe, had I gone in with a headfirst slide. Lesson learned!

Even though the inning ended, my teammates celebrated my courage and my aggressive play. I was, after all, just trying to make something happen.

I have long been a fan of a quote that I read inside of a fortune cookie, and I have tried to integrate its meaning into my business and athletic endeavors. The quote reads, "You can't steal second base and keep your foot on first!" For the traders and investors out there, this means that in order to take risks and make money, you can't second-guess your strategy or thesis, even if the trade seems uncertain.

I have worked with many traders who have initially felt that they were not making a good enough living because they were not getting involved in fast-moving trades and thus, were sitting on the sidelines during a huge opportunity to take a strong position. Many of them feel angry that they are watching others make money after having taken a big risk. The best traders, of course, take risks, and are so competitive that they would never be caught sitting on the bench starring at his or her P/L during a fast money making opportunity, no matter how uncertain it may be.

The other day, a trader who came to me for performance coaching missed out on taking a position with GlaxoSmithKline(GSK). He watched his colleagues jump in early, as they looked at some intriguing data points. He jumped in as well, but when the stock price began to invalidate his initial theory, he abandoned his position and pulled out prematurely because of fear. The others around him stayed with their conviction and remained poised.

I told this trader, "If you want to be successful, you have to be able to trade like you would drive a car. You can't drive with one foot on the brake and one on the gas simultaneously. You have to be comfortable with speed and with placing just one foot on the accelerator once you know where you are going." Even if he was wrong for having followed his initial conviction about Glaxo, he would have been right for sticking to his guns about the data points that he incorporated into his decision-making process.

In the fifth inning of my game Sunday, I singled again and was faced with the same decision as in the second inning. I had learned from my previous attempt that I could have successfully stolen second if I had slid headfirst. Against the same pitcher, I went against my urge to play it safe, and took off on the second pitch again. I wasn't going to be denied this time and went in headfirst. When the umpire called me safe and my teammates cheered, I reminded myself that I could never be a great baseball player if I started to doubt my ability to steal.

Even if you are foiled in a fast-moving trade, keep coming back into them with the same tenacity and conviction. If you have a good strategy and solid data points, you will reap the financial rewards at the end of the day. There are no real mistakes, just new learning experiences!

Please write to the Stock Doc with your trading, emotional or investing dilemmas. Dr. Cass always welcomes comments and stories, for which he'll try to offer valuable solutions in later columns.