Traders Can Learn Strategies From Baseball And Other Sports
Phil Storers Book Chalk Talks for Traders offers advice on probabilities and profit taking
Veteran stock and commodity trader and former collegiate coach, Phil Storer, says traders can learn volumes from coaches and athletes about short and long-term strategies aimed at winning the game.
In his recently published book, Chalk Talks for Traders Easy Xs and Os from a Proven Market Pro, Storer points to two basic approaches to trading. One is long-term, trend trading which I would compare to hitting a home run in baseball. It's very gratifying but hard to do. The other is shorter-term trading, which is more like a base hit, also gratifying and much easier to accomplish.
He says most of us are a little too impatient to be long-term traders, but that's all right as long as we recognize it and find a plan that fits us. Swing trading fits the short-term approach, and he says combines some of the most reliable concepts that I know--trend trading, market timing, money management and simplicity for strong results. Trading with the trend usually works best and timing your entry always makes good sense. Using protective stops is an important-money management tool to use, as is setting a profit target.
He prefers choosing short-term profit probabilities over long-term possibilities, though long-run trade projections can be winners. For many of us, hanging in for the long term takes more energy and discipline than we care to expend, he notes. Again, base hits are easier than hitting home runs.
Short-term trading usually involves less risk, but also means less profit potential. The short-term trader needs to work with a higher profit probability than the long-term trader, he says, noting thats where swing trading becomes useful.
In swing trading, you start by identifying markets that are already in a trend, or have attained a goal and have clearly reversed and begun a new trend, Storer says. You wait for a price correction to develop, and once that's occurred, you take a chart measurement that will give you a high probability of profit. You should also measure for other targets with more potential profit, though they're less likely to be hit. My preference is to take a profit at the first target because it has a significantly higher probability of being reached.
Protective stop-orders should be used when the trade is entered, he says. Stops are priced orders that aren't activated until the market trades at or through the required price, and then the order is soon filled. Stops can be moved into a low, no-risk or profitable situation when it makes sense to do so.
For instance, if you enter a market and it quickly moves within easy reach of your first target, you can move your stop to the point of entry to reduce exposure on a trade that's almost successful, Storer says. Sometimes it makes sense to take profits early-- like if you're near your target and the market's about to close for the day. Those are money-management decisions that can increase winning probabilities and your bottom line.
Swing trading offers opportunities for people with accounts of almost every size, he says. Those with large accounts can participate in many trading opportunities and increase the number of contracts traded to suit their appetites. But those with medium-sized and small accounts, trading one or two contracts, have to be more selective about markets.
In another sports analogy, Storer says trading markets is much like riding the surf or swimming in the ocean. Surfers, swimmers and traders have the ability to make choices that usually determine their success or failure. Catching a wave or a trend is a thrill no matter how many times you do it, he says. Feeling the water trying to pull you with it as it rushes back out to sea is a great deal like the searching times in between trades. A riptide is just like the temptation to take a losing trade. Traders who dont return to their original plans but continue to slip back into the riptide run the risk of being swept out to sea. That experience can be enough to take them out of the game.
In baseball, surfing and trading, there's enough randomness to frustrate our drive for perfection, Storer says. What we want to do is use probabilities that we know--to give us the edge we need to experience the success we want.
Storer says I still remember how hard it was to become a consistent winner and how I wished that someone would tell me how to do it. As you read and digest my book and apply the simple strategies to your own trading, I think you'll find your time well spent. I simply ask that you read carefully and follow the disciplines as I state them. Storer specializes in creating plans for clients by drawing on four decades of market experience. He is Director of Trading for the commodity division of Dillon Gage Inc., a full-service brokerage firm based in Dallas, Texas.
Veteran stock and commodity trader and former collegiate coach, Phil Storer, says traders can learn volumes from coaches and athletes about short and long-term strategies aimed at winning the game.
In his recently published book, Chalk Talks for Traders Easy Xs and Os from a Proven Market Pro, Storer points to two basic approaches to trading. One is long-term, trend trading which I would compare to hitting a home run in baseball. It's very gratifying but hard to do. The other is shorter-term trading, which is more like a base hit, also gratifying and much easier to accomplish.
He says most of us are a little too impatient to be long-term traders, but that's all right as long as we recognize it and find a plan that fits us. Swing trading fits the short-term approach, and he says combines some of the most reliable concepts that I know--trend trading, market timing, money management and simplicity for strong results. Trading with the trend usually works best and timing your entry always makes good sense. Using protective stops is an important-money management tool to use, as is setting a profit target.
He prefers choosing short-term profit probabilities over long-term possibilities, though long-run trade projections can be winners. For many of us, hanging in for the long term takes more energy and discipline than we care to expend, he notes. Again, base hits are easier than hitting home runs.
Short-term trading usually involves less risk, but also means less profit potential. The short-term trader needs to work with a higher profit probability than the long-term trader, he says, noting thats where swing trading becomes useful.
In swing trading, you start by identifying markets that are already in a trend, or have attained a goal and have clearly reversed and begun a new trend, Storer says. You wait for a price correction to develop, and once that's occurred, you take a chart measurement that will give you a high probability of profit. You should also measure for other targets with more potential profit, though they're less likely to be hit. My preference is to take a profit at the first target because it has a significantly higher probability of being reached.
Protective stop-orders should be used when the trade is entered, he says. Stops are priced orders that aren't activated until the market trades at or through the required price, and then the order is soon filled. Stops can be moved into a low, no-risk or profitable situation when it makes sense to do so.
For instance, if you enter a market and it quickly moves within easy reach of your first target, you can move your stop to the point of entry to reduce exposure on a trade that's almost successful, Storer says. Sometimes it makes sense to take profits early-- like if you're near your target and the market's about to close for the day. Those are money-management decisions that can increase winning probabilities and your bottom line.
Swing trading offers opportunities for people with accounts of almost every size, he says. Those with large accounts can participate in many trading opportunities and increase the number of contracts traded to suit their appetites. But those with medium-sized and small accounts, trading one or two contracts, have to be more selective about markets.
In another sports analogy, Storer says trading markets is much like riding the surf or swimming in the ocean. Surfers, swimmers and traders have the ability to make choices that usually determine their success or failure. Catching a wave or a trend is a thrill no matter how many times you do it, he says. Feeling the water trying to pull you with it as it rushes back out to sea is a great deal like the searching times in between trades. A riptide is just like the temptation to take a losing trade. Traders who dont return to their original plans but continue to slip back into the riptide run the risk of being swept out to sea. That experience can be enough to take them out of the game.
In baseball, surfing and trading, there's enough randomness to frustrate our drive for perfection, Storer says. What we want to do is use probabilities that we know--to give us the edge we need to experience the success we want.
Storer says I still remember how hard it was to become a consistent winner and how I wished that someone would tell me how to do it. As you read and digest my book and apply the simple strategies to your own trading, I think you'll find your time well spent. I simply ask that you read carefully and follow the disciplines as I state them. Storer specializes in creating plans for clients by drawing on four decades of market experience. He is Director of Trading for the commodity division of Dillon Gage Inc., a full-service brokerage firm based in Dallas, Texas.
