Being Right and Sitting Tight
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It’s important to be able to “step back” once in a while — in life, in work, and in markets, too. For those who would be rich, patience and wisdom count for far more than being clever.
Greetings from Delray Beach, Florida.I’m writing to you this morning from a beach house that sits about two blocks from the ocean.
The windows in my little red-tiled bungalow are filled with palm trees; all the furniture is made of wicker (or maybe bamboo).
It might sound like a vacation, but it isn’t. (Then again, it isn’t exactly tough being asked to stay in places like this.) On Friday, it’s back to Nevada, and then more traveling shortly after that.
When you’re used to going 110 miles an hour almost all the time, as I am, it sometimes takes a change in routine to make you realize you’re exhausted. That realization happened for me on Wednesday, after a day’s worth of plane travel.
Taking time out to walk along the beach, or do a little hiking in the mountains, or even something as simple as finding a quiet spot in the park and stretching out on a blanket is no small thing. Whenever I forget how important it is to step back and relax, it’s only a matter of time before I’m rudely reminded again.
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Occupational Hazards
It’s vital to be able to “step back” from life once in a while. The same is true in business, and it’s true in markets, too. For traders and investors who watch the markets closely — who follow all the zigs and zags — it’s very easy to get overly caught up in the game.
I was reminded of this, too, by an excellent quote from the latest issue of Grant’s Interest Rate Observer. (Grant’s is one of my favorite reads; definitely an acquired taste, though.) Here it is:
Professionals in the change-anticipation field fare little better than the amateurs at divining the big turns, possibly because the experts overreact to the little turns. They labor under the occupational hazard of the itchy trigger finger.
That statement is so, so true. I think of the trouble as being “too clever by half.”
When it comes to exploiting the “big turns,” there’s an aspect of humility plus wisdom that’s hard to pin down. It takes humility to spot something big and obvious without getting too fancy about it, or getting too clever in the analysis. It also takes humility to take a shot and be wrong, maybe more than once. And it takes wisdom to put all the pieces together the right way.
The Importance of Sitting Tight
The other hard thing is that, most of the time, the biggest profits aren’t in catching the turn anyway. Real fortunes are made with traits like patience and grit and fortitude… sticking to one’s guns and not getting put off by setbacks.
Jesse Livermore put this so well in Reminiscences, he is worth quoting at length here. (Still planning to get you that report of selected quotes, by the way.)
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at their very level which should show the greatest profit. And their experience invariably matched mine — that is, they made no real money out of it.
Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.
The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.
The Weekly Perspective
One of the ways I try to “step back” on a regular basis — when I don’t have time to crash for 10 hours and skip the 24-hour news cycle in an ocean beach house, that is — is by looking at weekly charts.
There is just something great about a weekly chart. Because each bar represents five trading days, and because the full width of the chart covers months or even years, the day-to-day “noise” just gets filtered out.
Looking at nothing but short-term charts can make you feel like the white rabbit from Alice in Wonderland after a while. I’m late! I’m late, for a very important trade! Weekly charts are the cure for that malady. If you can remember that the biggest and strongest trends are more like slow-moving glaciers than zippy little sports cars, you’ll probably be better off.
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Tags: Brazil, dollar, Dow Jones, ETFs, gold, India, International, Ishares, Philly Bank Index, resources, RKH, Spdr, XlfAbout the Author
Justice Litle, Executive Editor for the Taipan Publishing Group and of the Free E-letter, Taipan Daily, has a unique background that has served him well in the markets. Originally pursuing a PhD and a life in academia, his career path changed forever after discovering The Investment Biker, Jim Rogers chronicle of macro investing by way of motorcycle.
Taipan Daily is your free resource for late-breaking investment opportunities to help you beat Wall Street to the profits. Filled with investment analysis and insight from every sector. Taipan Daily delivers just the right blend of safe opportunities with the fast-moving plays, so you have an insider's edge over Wall Street and other investors.