ZF Capital

WHEN I HEAR PEOPLE bad-mouth Wal-Mart Stores (WMT) for its supposedly evil business practices, I wonder if they have any appreciation at all for just how difficult it is to create even one job, let alone 1.5 million. The ability for a business to be able to cut paychecks week after week, even during the tough months, is an achievement few seem to acknowledge.

Traders can appreciate it, however, because in the markets there’s no such thing as a regular paycheck. Just as most retailers’ profits are seasonal, a trader’s income is highly erratic. The most common profile consists of long stretches of small losses punctuated by a few impressive scores. And because it’s usually feast or famine, the ability to structure a portfolio toward more-consistent returns is a helpful technique that traders of all levels should employ.

Many traders aim to build consistency into their portfolios in exactly the wrong way: by overtrading. Strategies such as rolling stocks or short-term scalping only contribute to the fallacy that the market can function as a sort of endless ATM, where all you have to do each day is show up to make a withdrawal. And while there are dozens of services that promise you a handful of sure stock picks each day, it’s a loser’s game that serious investors should avoid playing. (more…)