Trading perspective from a Hedge Fund Manager Part: 4/5

MarketAce · #1 (**permalink**) 04-02-2008, 08:00 PM

PART: 4/5

by Kevin Teeple

Forecasting is not a respectable human activity, and not worthwhile beyond the shortest of periods.” – Peter Drucker

You have but two paths before you Kevin, before any trader or investor that wants to make money in the market that is. First, you can either join this
Herd-mentality that will eventually lose most, if not all, of their money trading blindly; praying that the market will turn in their favor. Or, choose the second path and steer clear of this herd and become one of a niche-few that has actually identified a profit pattern in the stock market, and knows how to exploit it - for profit.

“It’s in this moment of your decision making that your financial destiny will be determined.” Choosing the second path will all but guarantee that the next couple years of your life you will not trade a single penny, but instead, endeavor thru an exhaustive amount of time and energy in search of a profit pattern, a trading strategy that you may never find at all. Choose wisely!

Yes, these talks were initially quite curt and to the point, not to mention only minutes or so each month at best, in the beginning. Nonetheless, it was during those times with him, that I finally got what the Landmark Forum was trying to teach me. He shifted my perception just enough, to teach me what I didn’t know, that I didn’t even know about trading successfully. Then, it wasn’t too many years thereafter that these rolls were reversed on me, as a result of the most horrendous terrorists attack ever on U.S. soil; and I was the one sharing this same wisdom with others who needed to hear it.

“We are all drowning in information but starving for wisdom.”

- Anthony Robbins

It was just days after our country was attacked by terrorists that I was honored to be an invited guest on CNN financial network, Bloomberg, and the Fox network to answer questions from callers around the U.S... Unlike other appearances in the past where an informal, yet politically correct sound byte answer was strongly advised; this time I knew that the “politically correct,” gloves needed to come off, as this was unquestionably a time for straight talk.

Like so many of us then, I didn’t have a clue what the markets were going to do in the following days or weeks; and I certainly wasn’t going to insult the listeners’ intelligence by pretending that I did and giving them some pseudoscience prediction or market forecast. I did however have an edge, I knew exactly how I was going to trade the market and therefore precisely what I was going to say on CNN and this is what I said: “This is Not the time to invest in the stock market; this is the time to protect your money!”

If you are going to error, error on the side of protecting your investments regardless of what the markets did moving forward.

Everything that I’d had learned to be true up to that moment in our history, told me this was a time to set it out. You never see a professional bull rider trying to mount a bucking bull in the ring, so why would anyone enter the market then – the risks were far too great. This may not have been technically sophisticated, remarkably ingenious or bold enough for some of my counterparts being interviewed that day, but the partners in my hedge fund and listeners didn’t protest at all. After all, that month of September, as well as for the year, we finished with a very respectable ROI - and that’s all that matters.

“Track Record is everything.”

– Warren Buffet

If you find yourself nodding your head yes right now, then we probably have a lot in common when it comes to investing our money.By leaving our emotions, opinions, and the news outside our trading office during that terrifying time in our Nation’s history, it made all the difference in our hedge fund’s success. Avoid obsessing over the confusing and complicated, and rely solely on what you’ve identified earlier, as being true, your strategy.

“The definition of insanity is trying the same approach over and over hoping for a different result.” – Benjamin Franklin

First, Never – ever - never “play the market.” When you enter the stock market today, it’s only slightly different than you entering the coliseum in ancient Rome in 80 AD; as you watch in terror as a gladiator rushes you. Just as the gladiators back then had one intention when they entered the arena – too kill; professional traders are not too much different in that regards. Professional traders have one objective, and that is to make money – they never play the market. Fortunately for the losers in this modern day coliseum, they are seldom killed, but to a certain extent, they are financially decapitated or crippled.

Second, abandon any preconceived opinions you might have about where you think the market will or will not go – Trying to convince the stock market that you are right can be very expensive.

Third, realize that the markets are in fact a zero sum game, in order for you to make money - someone else will have to lose it so prepare yourself thoroughly.

Fourth and most importantly, know that every word discussed here is absolutely useless, without the proper money management supporting it.

Bulls make money, bears make money but pigs always get slaughtered!

- Wall Street truism.