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In the 200 IM of Investing, It Ain't Over Till the Last Stroke

Poolside ruminations on sticking to your game plan.

While you're reading this column, I'm sitting poolside, watching day three of the North Baltimore Long Course championships. Of course, I'm having a ball, but you know what else I'm doing? I'm working on my trading.

Yeah, I know, get ready for ol' Gar to take you into the deep end, with some loony line of reasoning, right? Well, right. But, this is something I take seriously, so read further and see if this makes sense.

What I've discovered, and what I'm sure many of you have discovered, is the single biggest detriment to successful trading is yourself. Yeah, you, you big bozo. You're the one who's screwing things up. I know, because invariably

I'm

the one who screws up my own trading!

How do I do it? It's always the same thing: I interfere with my original plan. I plot out a great strategy on Monday, and by Tuesday it's long gone as I'm jerked every which way by a CPI number. Or a PPI number. Or an EIEIO number. Whatever, I'm usually no better than a speck of dust in a wind storm, going up, down and sideways, depending on the breeze.

Really, it's a pathetic way to trade, and I always come back to the same thing: If I had only relaxed and executed Plan A, instead of panic Plans B through Q, I'd have been a lot better off.

So, what does this have to do with watching a swim meet? Ironically, a lot, as my reactions -- specifically to watching Diana swim the 200 IM -- are the same as watching a trade initially go the wrong way.

Let me explain. The IM, or individual medley, is made up of the four basic strokes: butterfly, backstroke, breaststroke and freestyle, and swum in that order.

Now, good IM swimmers come in many forms, but there's always one constant: a bad breaststroker simply cannot be a good IM swimmer. As the slowest of the four strokes, if you're 20% weaker than the field, you simply give up too much time to make it up in the other four strokes.

On the flip side, you can be average in the other three strokes, but still place reasonably well, just by being great in the breaststroke. This is Diana's category, and the source of my constant consternation.

The scenario has unfolded the same way in every IM in which I've seen her swim. She's okay in the butterfly, but in a heat of eight, usually fifth or sixth after the first 50 meters. So, at this point, I'm worried. Yes, I've seen this situation unfold about 100 times, but I can literally feel my pulse quicken as I get more and more anxious.

Ah, but then we get to the backstroke where, well, she stinks. And every meter I watch her fall further and further behind, my nerves get ground down bit by bit. More than once, I've turned to Nancy and cried, "She's getting murdered!" I mean if she was a stock, I'm thinking I'd sell her right here and now, and maybe even go short. I finally give up, kick the bleachers and moan, "She'll be lucky if she finishes!"

The race is at the 100-meter point, and I've given up. She can't do it; she won't do it; this is KILLING ME!

And then -- always -- a remarkable thing happens. She starts to chip away at the field in the breaststroke leg. Stroke after stroke, she cuts into the lead, grinding away at the competition. I start breathing again. "Yes, she's doing it. This is good. Oh my, she has her rhythm now. Wow, this is fantastic. Three more meters, and she'll be tied for the lead!"

And, invariably, at the end of the breaststroke leg, everything that occurred previously is forgotten. "Short her? My God, I should have been buying Diana shares like a maniac! What was I thinking? I

knew

this would happen. It

TheStreet Recommends

always

happens. Oh why oh why did I ever give up on her?"

And then for the final 50 meters, it's usually a dog fight. But, thankfully, Diana's second-best stroke is the freestyle, and with everyone else drained in the breaststroke, it always comes down to one thing: guts and stamina. And if there's one thing my daughter has, it's guts; 4,000 yards of practice a day takes care of the stamina part.

So, the race is over, I look up at the clock, and yeah, a great race and a great time. "What in the heck was I worried about?" I knew the game plan, she knew the game plan, and everything went off without a hitch. Silly of me to ever lose faith.

Now, does all that sound even vaguely familiar to any of your trades? Sure it does. The quickening pulse, the throwing in the towel. The forlorn feeling that all hope is lost. Yeah, I've been there. Too many times to count.

So, you know the feeling as well as I do. And as surely as Diana wants to improve her backstroke, I want to get better at handling these situations, both in swimming and in trading.

So, here's what I do: I practice my breathing. I know, it's silly, and oh-so-Zen Buddhist, but it's the only thing I know how to do. Yes, I try to envision a rock-like coach -- picture the unflappable John Wooden with all those great

UCLA

teams, or Donald Sutherland as Bill Bowerman in the underrated

Without Limits

-- and you have an idea of what I'm talking about.

I literally try to watch the IM as an impartial outsider, feeling impervious to what happens after the first two legs (Yes, yes, I cheer like crazy, but that's all before the race and during the last lap. Not that she can hear me anyway.) And I think about my breathing. And I try to relax, letting events play out as they normally do. I mean, like thousands of trades, I've been here before, and what I absolutely do not want to do is lose my composure and panic. So, that's what I practice. (The high-fives come

after

the race!)

And, really, I think it helps. Sure, I always have a protective "stop." If Diana swims poorly, oh well, we just write it off, and regroup for her next race. If the trade goes bad, I just take my loss and move on to the next one.

But, you have to practice this stuff because just about everyone has difficulty fighting off the fight/flight, elation/dejection merry-go-round. And so whenever I'm in a high-pressure situation, vicarious or otherwise, I practice my breathing. And I think about my trading. And hope that one day, Diana becomes a better backstroker!

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 held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at

gbsmith@ibm.net.