One Playing Field That's Tilted In Your Favor

Much to discuss today, and don't forget to take my little survey at the end of the column. The outcome will, most definitely, have a far-reaching impact on the rest of your life!

OK, first up, I hope you're reading this column on RealMoney.com -- not so much because this column is any better there than on TheStreet.com, but because all my really current thoughts are posted on RealMoney.com, via the Columnist Conversation chat. Usually, I'll have something posted about the market, about specific stocks, or about how wrong guys like Adam Lashinsky and Herb Greenberg always are! (Trust me, there's a lot of fodder in that area alone!) Best of all, it's in real time. As soon as I type it and hit enter, there it is, for all to see.

Next up is this little shindig Adam, Herb and I are doing in New York City in one week. If you need more info, jog over to the RealMoney Conference page and read up on it. I'll have my laptop loaded with just about every chart you want, and promise to stay up way past my bedtime to entertain and amuse. Shoot, it'll be worth your time just to see me take Adam apart piece by piece. (Sure he's smooth ... when he's scripted. But unrehearsed? Hey, now he's playing on my home court!)

Now that the advertising is out of the way, let me tackle an interesting email I received from a reader:

Gary:

Like many others, I've suffered some cuts and bruises over the last 3 months in my trading. The bandages are still on and I'm still in the game. But, are those of us who have day jobs, do our research in the evenings, and make maybe 4-5 trades a week to generate some extra income just kidding ourselves that this is a viable endeavor? Are we overmatched by the full-time traders with more sophisticated systems?

What are your thoughts, and what are your readers saying?

Thanks,
Vincent Scott

Vincent, I am almost certain most readers would say they are not overmatched by full-time traders with more sophisticated systems. And, I'd concur for two reasons.

More Power Does Not Equal More Profit

One, let's tackle the "sophisticated systems" angle. To be blunt, unless you're daytrading, you really don't need a lot of sophisticated systems. In fact, when I read through a magazine like Technical Analysis of Stocks and Commodities, I am struck by all the pandering of hardware and software that looks nice, sounds useful, but isn't at all necessary to trade well.

In that regard, trading is a lot like golf. You know who buys all the latest gadgets and gizmos? It's the hacks. The pros are the folks playing with the simple, straightforward equipment that has few bells and whistles.

Now, let's not confuse me with a pro, but let's look at what I rely on. For real-time quotes, I use MyTrack.com, but the fact is, unless you're daytrading, you really don't need real-time quotes. In fact, as I've mentioned many times, just having them available has done me more harm than good, as I'm tempted to react to the market instead of adhere to my method.

For charting and end-of-day data, I could use something as sophisticated as TradeStation -- and I did give that a whirl a few years ago. But, instead, I stick with the tried and true Worden Bros TC/2000. It has the standard number of indicators and such, but I don't even use 5% of what it has to offer. Instead, I keep it simple by looking at price, volume, and a few patterns.

Packages like TradeStation and others are terrific, and I don't want to knock them. But I've found that the more indicators that are offered, the more a trader will look to use. The result is either "analysis paralysis," or the development of a fantastic system with so many rules and measures, that it would be virtually immune to nasty markets or any kind of drawdown of your trading capital. On the other hand, it would generate probably one trade signal a year, so unless you're willing to take your entire pot and place it squarely on that one trade, that kind of system is useless.

That takes care of "sophisticated systems." In short, no one needs a sophisticated system to make money, unless you're doing high-tech arbitrage or computer-generated program trading. For everyone else, what they have is probably too sophisticated already.

Part-Time vs. Full-Time

And that leads me to an analysis of full-time traders and the perceived advantages they might have. And, about the only one I can think of is that many -- though, certainly not all -- have a better feel for the market than part-time traders. And that only makes sense. If you're on top of the market 10 hours a day, it's likely you'll pick up a few more nuances than someone who is able to trade only a few hours a week.

However, the problem most full-time traders face is that they feel obligated to trade every day. The problem with that? Not every day is a good day to trade!

So there you are, ready, willing, and able to work, but the market is saying "take the day off." Trust me, that's extremely hard to do, so what usually happens is you trade anyway, with less than optimal results.

To that end, a full-time trader friend of mine remarked that if he could only restrict himself to trading the two or three "great" days a month that came along, he'd be much more profitable over the long term.

Back To You

Now, what's this have to do with you? You aren't in the position of feeling pressed to trade every day. Instead, you have the luxury of waiting patiently and picking your spots. And that, Vincent is one key, if not the key to good trading. Patience, patience, patience. Something you are almost forced to have, but something that is in such short supply among most full-time traders.

So, in reality, what are you up against? Sophisticated systems that don't make a difference, and full-time traders trading full time ... when they probably shouldn't. Now, that sounds to me, like you might be the one with the advantage.

Customer Survey Time

Finally, topic last: I'm thinking of changing my commentary lineup a bit, but need your feedback. As it stands now, my Monday and Wednesday columns are usually devoted to short essays on trading, with few or no charts.

However, at the end of the week, the Friday, Saturday and Sunday columns are 99% chart columns, where I run through about 20 to 25 charts.

What I'm thinking of doing, though, is changing things around. That is, I'll move the columns I usually do on Monday and Wednesday to the weekend, with the charting columns running during the week. That way, I can talk about market action on a more real-time basis, and you can let my thought-provoking (yes, that is a joke!) essay-type columns wash over you on the weekends.

So, send me an e-mail , with either Keep or Change in the subject line:

Keep: Leave things alone-there hasn't been a more perfect lineup since the '27 Yankees

Change: Change to run charts during the week ... with that touchy-feely, nonsensical stuff running during the weekend!

Oh, and one parting comment. Many of you chided me for my bashing of Tiger Woods, and couldn't resist saying "I told you so" as he waltzed to a 15-stroke victory in the U.S. Open.

Well, to that I can only reply: "He was just plain lucky!!" So there.