Wednesday, December 21, 2005
Daring to be Great: Trading Lessons from the "Splendid Splinter"
Inevitably as the year winds down, traders are caught in the decision of whether they should “take it easy” or step it up to “finish with a bang.” Unfortunately, I don’t have the perfect answer, but thanks to the legendary baseball player Ted Williams aka “The Splendid Splinter,” I do have some insights on how he thought about these things and as a result, how you, as a trader can think about them.
I continue to believe that "taking yourself out of the game" is not the right answer unless under specific circumstances where the mental/emotional damage caused by losing money outweighs the feelings of success you would experience by continuing to trade.
With that said, you have to ask yourself, "If I only made the highest quality of trades - how will I feel about the outcome if I make/lose money?"
In general, traders do not mind losing money (they understand it is a necessary part of the game) - what they do mind is losing money doing the "wrong" things such as being sloppy, undisciplined, etc.
You really have to know yourself and ask yourself how you are going to feel about the situation two weeks down the road, if you made great trades but lost money?....as that is a possibility.
Lesson from the “Splendid Splinter”
In 1941, Ted Williams was batting .39955 (which rounded up to .400) with 2 games left in the season. His manager, Joe Cronin, suggested Ted sit out the last two games (a double header against Philly) so he could end the season batting .400, which by the way was a remarkable feat, as all baseball minded people know.
Ted's response was "I don’t want to hit .400 that way." He refused to be benched and went 6 for 8 in the last two games, finishing his season with a .406 batting average.
The lesson for traders and the real question is....if Ted had gone 0 for 8 in the last two games and ended the season UNDER .400, would he have regretted his decision?
I think the answer is "No."
Ted had a passion for the game, strong internal confidence and was willing to accept whatever outcome may have resulted from his decision. Fact is he wanted to hit .400 but he did not want to achieve it by hiding.
Now, only you know if playing in the last two games of season is the right decision for you. Ted made the right choice for HIM but in a game as difficult as trading; sometimes sitting on the bench is the exact right thing to do. The bat is in your hands and the choice is yours to make…just be comfortable with what the consequences may be before you make that decision.
Until next time, keep your eye on the ball and your head in the game!
-- The Head Coach