When Going for the Green, Find Your Sweet Spot and Stick to It

A lesson from the links for traders.
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When I was 21 -- my god, half a lifetime ago! -- I was at the height of my golfing powers. Shoot, I was single and had plenty of free time to hone my game.

So I started playing in a number of local amateur tournaments and humbly thought I was pretty good.

But in order to gain any widespread acclaim in my little neck of the woods, a player had to do well in one tournament: the Lehigh Valley Amateur.

Yeah, if you lived in Allentown, Bethlehem or any of the nearby communities, that was

the

tournament to play in. It wasn't exactly the U.S. Amateur, or even the Pennsylvania Amateur, but, at least for me, it sure felt like it.

Anyway, you had to qualify to get in, with the low 16 making the championship flight. After that cut, it was then match play, man vs. man, until there was only one left.

In qualifying, I was stellar. Shot 74 to qualify second, and I hardly felt like I was trying.

So, seeded second, I then played the 15th seed, some poor schlub who barely made it into the championship bracket. And when I saw him walk up to the first tee, I almost started laughing. Here I was, a veritable

Johnny Miller

, tan, fit and trim. And this guy had to be ready for the Senior Tour.

Even worse, he had clubs that probably dated back to the early 1800s, and I swore he was going to produce a gutta-percha ball from deep within that scraggly, canvas bag he was toting. This was going to be a cakewalk.

The first hole I blasted my drive about 30 yards by him, hit a 9-iron onto the green vs. his 5-iron, and had a simple 15-footer for birdie. He managed to hit the green but had about a 40-footer for his birdie.

He drained it. Even worse, the damn thing hopped like a rabbit and didn't roll into the hole as much as bounced in. I missed mine. Quickly one down.

The next hole was pretty much a repeat. Only this time he didn't leave himself a 40-footer. He had a monster 60-footer. Ha! Surely he'd three-jack this, and I'd have an easy hole to even up the match. Right. He lagged to 6 inches and tapped in. And again, I missed my birdie. And missed the next one. Two down.

And that's pretty much how the rest of the round went. Tee to green, I was the superior golfer. Longer, straighter, more shots in my arsenal.

And he had exactly one thing going for him: his %$#% putting. And it wore me down. I'd make great shots; he'd skank something on or near the green and then save the day by holing some roller coaster putt to beat or tie me.

He finished me off by the 13th hole. So much for winning the Lehigh Valley Amateur.

So why do I take you through all this? Because I realized then with golf, and now with trading, that you only have to be good at one thing in order to excel. As long as it's the right thing, of course. With golf, it's putting. Have a great wand, and you can make up for a lot of mistakes in other areas.

But, with trading, there are a lot of "right" things. In other words, there are so many opportunities to make money, so many areas to excel in, that the real trick is to find your area of expertise and just pour it on.

Let me give you an example.

Warren Buffett

is great at valuation and patience. And that's all he needs to be a billionaire. He thinks

Coca-Cola

(KO) - Get Report

is undervalued at $X, so he buys and he holds. Think he'd be a great daytrader? Unlikely. Does he know anything about Internet stocks? Doesn't seem to. But in the end, it doesn't matter. He found his way, and for the past 40 years or so, it's worked.

On the other hand, another friend of mine -- a technician -- is wonderful at using oscillators. But only on technology stocks, and only on an intraday basis. For example, if

eBay

(EBAY) - Get Report

is down 10, he'll decide it's way oversold, go in and buy 1,000 shares, wait for it to be down only 9 and then unload it. And he does this day after day. But he never holds overnight, and he has absolutely no long-term positions. And it works. That's all he needs.

Me? I guess if I had to pin it down, the thing I'm most consistent on is shorting stocks for a multiday trade. I don't know why I seem to be good at that, but I have the patience of Job when it comes to shorting. I'm often in and out the same day, but if the stock rebounds the day I go short, I have zero qualms about continuing to hold. I just have faith it's going to drop again. And most of the time it does. I really can't explain it.

Here's the nut: I'm trying, and continue to try, to get good at a lot of things. Going long, going short, position trading, buying and holding, etc., all in the hopes of rounding out my overall skills and making me a better trader.

But I have to ask myself why. I mean, why not just focus solely on shorting? It's not like there aren't plenty of opportunities every ding-dong day! Something silly is always crashing to the ground, no matter how strong the bull market is or isn't.

Maybe your expertise is with drug stocks. Maybe you just know when it's time to buy

Merck

(MRK) - Get Report

and short

Pharmacia & Upjohn

(PNU)

. You've gone back over your trading records, and you're average everywhere else, but boy, you seem to have that sector nailed. So isn't that enough as long as those companies stay listed and are available to trade?

Or maybe you're just good at identifying one pattern and trading off that pattern. One reader I know seems to be able to spot bullish pennants on one chart or another almost every day. He enters, the stock then seems to burst upward and he exits the trade. Why does he excel in this arcane area? Who knows? But he does. And that's all he really needs to make a good buck.

The problem, of course, is that we're never satisfied. Or we get bored. So we try to stretch a little and expand outside of what we're just naturally good at. Heck, I'm guilty of that on a regular basis.

But this is real money we're talking about, and I'm betting most of you have at least one trading skill you're pretty darn good at. So stick with that. Develop it. Nurture it. If you concentrate just on that, it's probably enough to have you beating the market day in, day out.

Anyway, it's just a thought. Time to go work on my putting.

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.