3M's Run May Not Stick
This column was originally published on RealMoney on Oct. 26 at 8:32 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.
As many of you know by now, we recently acquired two poodle puppies and my education with them mirrors what many of you are going through (or went through) with your trading education. The trick, I believe, is to know where you are on the learning curve, so you know best how to proceed.
Phase 1: You pick up one or two things and you think you know it all. That pretty much described many "traders" from 1998 through 2000.
Phase 2: You realize you don't know that much, so you start getting knowledge any way you can: books, the Internet, seminars, etc. Every time you learn something new, you think, "That's the answer!"Phase 3: You still accumulate knowledge, but start to weigh one school of thought against another. No longer is everything you read assumed to be gospel. (That's where we are with our dogs, by the way.) Phase 4: You still pick up things along the way, but have pretty much assimilated everything you need to be successful and have arrived at your own conclusions and eventually, philosophy. I'd like to think that's where I am with my trading. I mention these phases because the market is far too tough now to have many people still in Phase 1. Instead, in my experience, many people tend to get stuck in Phase 2. Either they don't have time to continue their education, or they believe they've stumbled upon a "guru" who appears to have all the answers. That's a shame, as getting stuck there usually leads to losses in the long run since adopting an approach that's successful doesn't necessarily mean that approach will be successful for you. As an example, a few years ago, there was a great industry of Warren Buffett followers. That industry shrunk a bit when those folks realized they couldn't absorb the great drawdowns the Oracle is able to withstand. Therefore, the best thing you can do is realize where you are in your education and vow to keep learning until you have your own way of going about things. How to know? If you can go a week without any outside influence, and still trade successfully, you're probably there. Today, charts for the Nasdaq Composite Index, 3M (MMM), Aldila (ALDA), American Standard (ASD), PepsiCo (PEP) and Gatx (GMT).
Charts produced by TC2000, which is a registered trademark of Worden Brothers Inc.
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