Friday, October 2, 2009

Trading Like 007

If you remember THIS post, you know I'm intrigued by the spy genre (borderline 'obsessed' around the time a new Bond film releases). While watching the newest 007 installment, Quantum of Solace (for the second night in a row...really, what's wrong with me?), I couldn't help thinking about how his life relates to stock trading. In almost every adrenaline-filled, pulse-accelerating situation, his training seems to summon 3 distinct reactions: He looks before he leaps, takes calculated risks, and always protects his assets.

Look Before You Leap

There are countless scenes, especially with the new, physical Daniel Craig, where Bond has to make a split decision. The consequence of that decision could prove fatal, had he not been
trained by MI6 (British Secret Service) to react quickly and decisively in life threatening situations. Any Bond/Bourne fan can recall countless times where a jump from a window, dive into/onto a moving vehicle, etc., was made only a spilt second after the protagonist saw his opportunity. Keep in mind, it's part training, part instinct (Not everyone can be trained to be an effective assassin).

There is a direct correlation to trading stocks. In the heat of the moment, it's all too easy to jump on board a skyrocketing ticker or hit the buy button in order to catch a falling knife without really knowing what you're getting yourself/money into. This is happening all too often, now that some trading platforms allow traders to (almost blindly) follow the trades of others. There are known traders such as Timothy Sykes, Investors Underground, and now Reaper, who have many followers/leapers/minions doing just that- following their trades without looking. While they may be lucky enough to begin that bonehead practice with some gains, it just doesn't work long term. They must know what they're looking at/for in order for their leaps not to completely ruin them.

Take Calculated Risks

Bond learned a hard lesson in Casino Royale when he was wiped out during a game of Texas Hold 'Em-style poker. LeChefre, the film's main antagonist, had fooled 007 by faking a tell (Manuerism that let's your opponent know whether or not your bluffing). Bond in turn goes all in, and subsequently loses his entire bankroll (To be accurate- the UK's bankroll).

Being able to properly manage your trading account's risk, or % of your total assets you trade with in a given order, is a make-or-break ability- which can and most certainly should be learned. I can't tell you how many times I've heard (and let's be honest, I'm guilty of this myself) someone say this type of sentence, "That one trade wiped out my entire week's/month's gains". Knowing how much you're willing to lose before ever leaping into a trade is a calculation every trader must know for himself/herself. Furthermore, one must be willing and able to execute an exit order if that threshold/risk level is reached.

Protect Your Assets

No matter what situation Bond finds himself in, he always manages to protect his most sacred assets: loyalty to her majesty, and himself. At times, he's forced to leave women, friends, Astin Martins, etc. behind so he can live to fight another day. Also, he seldom allows
himself to lose sight of his exit strategy simply because he's in the heat of battle.

With stocks, it's important to stick to your trading plan unless outside forces put your assets at risk. As you've probably noticed by now, the 3 qualities of a good secret agent and stock trader are virtually interchangeable. By looking before you leap, you're calculating your risk and protecting your assets. By protecting your assets, you are assuring your ability to take the next leap, and so on and so forth. Learn from the qualities that have kept James Bond from succumbing to the 90% mortality rate of other 00's.

Never wanting to be among the 90% of traders that lose money,

Evan (aka Island Minister)


Anonymous said...

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