FROM DRUGS TO drag racing, slot machines to Sycamore Networks (SCMR), we are a species that loves external stimuli. And when it comes to investing, seek and ye shall find. With a casino of stocks, options, exchange-traded funds, mutual funds and futures out there, there are more than a few places to find fast action. The problem is, fast action is usually losing action.
Patience is always a virtue, but in trading it’s a requirement. Despite the fact that traders are often thought to be constantly jumping in and out of stocks, the real money is made by holding on for the big moves. In trading as in life, good things come to those who wait.
So although I am a trader, I want to play the major moves. Short-term fluctuations are fodder for the talking heads, but trying to constantly scalp a half point out of a news headline is usually more trouble (read: risk) than it’s worth. My own results improved substantially once I stopped making big bets on small movements and focused on the converse. Small bets on big movements make much more sense. (more…)