I recently spoke to a group of technicians here in Maryland, and at the conclusion of my presentation, I got the same question I always get: "Are you concerned that by publicizing your methods, you will attract too many followers, thereby killing your own 'golden goose'?"
The answer is yes, of course, I'm always concerned that too many folks will jump on my bandwagon! On the other hand, I come back to this golf analogy: The basic fundamentals of golf are well known, and there are really only a few, concentrating primarily on the grip and stance. Master those, and you can wail away with just about any ol' swing and achieve pretty good success.
But, walk down a driving range, and if there are 50 people hitting balls, the odds are that 49 of them aren't using even one fundamental, let alone all of them. People are lazy, disbelieving or plain stubborn about doing it their own way.
So, in truth, no matter how well known the basics are, few choose to follow them.
Now, if you recall a few weeks ago, I wrote a multipart
series on building your own methodology. And one of the fundamentals was that no matter what style or approach to trading you picked, you had to be consistent. Trade based on biorhythms? Then trade
based on biorhythms.
You'd think it'd be easy, right? Just do the same darn thing every single day. Well, what if I stacked the odds even more in your favor? What if I gave you the exact methodology to use? And, furthermore, you knew it to be reliable, so all you'd have to do was execute. Would you follow it then?
Well, today's column is a demonstration of both human nature and just how hard it is to be consistent. In short, it's a primer on how hard it is to trade, how hard it is to follow a methodology and, I suppose, an illustration that there will never be too many folks stepping on my trades.
But, instead of going to my own history, I confess I did a little spying. As many of you know, there is a GBS thread on
where the participants follow my methodology. (It's at
In fact, the founder, Jim Crist, has done an excellent job in laying out my "basic beliefs" and even emails me on occasion for clarification. So, there should be very little room for deviation: Want to trade like me? See this thread. Don't want to trade like me? Plenty of other Yahoo! threads to look at.
So, I thought it'd be interesting to look over their shoulders and note their comments as they wrestled with the GBS approach. Specifically, I've read just about all the posts the past few weeks and have been cutting and pasting comments to use for this column. I left the respective names off, as I certainly didn't want to embarrass anyone. If it's any consolation, these comments could have just as easily been mine, as I've had similar thoughts throughout my trading career.
Therefore, in the interest of education, I'll post the comments I read and then some specific thoughts. No doubt, I come off a little imperious here, but sometimes a strict tone is the best tone.
"I let you guys talk me out of
This is probably the biggest reason for
being on a chat thread. Personally, I never discuss my trades with anyone until they're closed and booked. It's not because I don't trust anyone else's opinion, though. No, it's because I trust
opinion, and am easily swayed from my current course of thinking. You have to know who your allies are when you trade. My biggest one: silence.
"I bought some
(UNFY) , which might not be a GBS, but I liked it nevertheless."
Ah, the old discretionary pick. They're fine to make on occasion, but one -- especially if it turns out well -- usually leads to another. And then another. Pretty soon you don't have a rigorous methodology. You have a losing hybrid.
"I still have 200 long at 40 1/4. It actually went below my stop target, but I was undisciplined and kept it."
Look, at least this person recognized his or her error. Even better, though: Place a hard stop on the books as soon as you get your fill. It's the only way to ensure discipline.
(SFA) short could be OK, yet I am concerned about the long tail on Friday. Could be a blowoff. Early action could define the day."
And the man in the moon may appear. And the
may win the Series. And
could confess. Yep, there are a million variables at play on any one trade. You just have to decide up front, though, which you're going to pay attention to and which you're going to ignore. And if it's important, you should be measuring it. But, if you have no data on it, then further discussion or speculation is a waste of time.
"I was just too uncomfortable with the market today."
Again, is that something you can measure and track? Is your gut feel reliable? If so, let me see the data. I mean, maybe it was just those three tortillas you had last night!
"I cheated on entry slightly."
That's fine, but did you cheat because you're uncomfortable with your current style of entry? And if you are uncomfortable, you should find a better, more reliable method, and then stick to that.
"After yesterday's dubious picks, I'm playing it conservative."
How do we know yesterday's picks were dubious? Maybe it was just a lousy market, or maybe you had one of those days where you were on the wrong side of the trade. In fact, if you have a consistent methodology, it's suboptimal to be "conservative" one day, and "aggressive" the next. You really should be neither. What you should be every day is exactly the same -- consistent.
"Should I cover, or wait to be stopped out, or wait 'til tomorrow, or what???"
Personally, I'd go with "or what," but I found that to be unreliable. Probably better anyway to decide your exit strategy before you enter the trade, not after.
"With the bull market today, I was certain to close out some of my inventory, but no luck. Getting frustrated here."
Every trader gets frustrated, and it's something most of us live with constantly. The trick? Not doing anything about it, because as soon as you do, I guarantee that course of action will turn out to be a loser.
futures this morning, I'm going to wait until after the bell to reconsider my longs."
So, you've correlated the amount the futures are up with how high your fills will be, right? Oh, you haven't? So, you just
your stocks will open higher. Oh, I see, then you're really just guessing, aren't you? In that case, guess away, but then don't mistake what you're doing for a consistent methodology.
Now remember, these comments all came from a thread where the methodology to follow is pretty specific. But, as you can see, even then folks are all over the place. Heck, as I mentioned, I've had the same thoughts myself, and I developed the methodology!
So, it's tough. As a trader, you're always fighting human nature, your gut instinct and the easy way out. Take a second next time, though, and listen in over your own shoulder. Then give yourself a good stern talking-to. If you pay attention, you might save yourself some money.
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication he had no positions in the stocks mentioned, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. This column, Technician's Take, appears every Monday. Smith also writes Charted Territory, which appears every Wednesday, and TSC Technical Forum, which runs Saturdays and Sundays. While he cannot provide investment advice or recommendations, he welcomes your feedback at