A Moment of Brilliance
It has often been said that trading is not rocket science. Perhaps it isn't. You don't need to be as brilliant as a rocket scientist to trade the markets profitably. That said, there are moments when a trader has a brilliant insight and takes home huge profits because of it. (I don't know any rocket scientists, but I'll bet that a rocket scientist isn't brilliant every waking moment, and occasionally, must also rely on a moment of brilliance to get the job done.) All traders have their moments when they have a brilliant, astute insight and
profit from it.
When we interview master traders at Innerworth, we enjoy asking them to describe their biggest winning trades. Usually a combination of luck and brilliant insight results in the biggest wins. For example, in an often told story, a trader just happened to own stock in a company that was talked up by a media analyst. The price jumped on the news, and the trader sold into strength for a huge gain. In other stories, traders make a good guess that a product or service is bound to be in high demand in the future and that eventually the stock price is going to reflect the demand. For example, if you perceived early that all the kids on the block were going to successfully convince their parents to buy them an iPod, you would have made a killing buying Apple stock a few years ago. Other traders capitalize on unexpected world events. For example, if you lived in Richmond, California and saw a major refinery fire before the media picked up the story, you could buy stock in gasoline com panies before the story broke and set off a subsequent gasoline shortage. Winning big is often a matter of being at the right place at the right time, and having the right intuition regarding how the markets will behave. But it isn't simply a matter of luck. A winning trader knows the markets, and how they will behave to the news. Unfortunately, there is no crystal ball to tell you how the markets will behave. The past may offer a hint, but when it comes to the markets, history only repeats itself when it does. The rest of the time, the markets go their own way.
So what's the lesson? Sometimes you will have a brilliant insight and make a killing, but other times, you will not. Should you wait around for a brilliant insight and stand aside at other times? No. If you take no action, you will stagnate, and then, when a "once-in-a-lifetime" trade happens, you won't have the skills to execute the trade and capitalize on the opportunity. Instead, you should trade day after day, and always accept what the markets have to offer. Don't demand that the markets give you rare trading opportunities every day. There will be times when you will come across a rare market event, but the rest of the time, you have to settle for finding profitable run-of-the-mill trades. It is vital that you scour the markets for high probability setups and trade them, rather than only look for potentially big wins. The typical offerings may not allow you to achieve 50% of your earnings on a single trade, but they will allow you to make profits. And across a series of trades, these profits will add up.
As much as you want to find that big trade that you can talk about for the rest of your life, realize that it may not be the big, thrilling trades that matter, but the smaller trades you make every day to become a winning trader.
