Stiff Upper Lip

The hardest lesson to learn in trading is that of letting winners run and cutting the losers short. It's a mistake I made when I used to mess about with traded options, and it was a mistake I made often when I first started trading sports. And I still do it occasionally. All the trading manuals caution against 'falling in love with a position', but it's easier said than done.

My boss sent me an article about interviewing, written by Blink author Malcolm Gladwell for a magazine, and there was an interesting part which read:

"Are there things that you think you aren't good at, which make you worry?" I continued.

His reply was sharp: "Are there things that I'm not good at, or things that I can't learn? I think that's the real question. There are a lot of things I don't know anything about, but I feel comfortable that given the right environment and the right encouragement I can do well at." In my notes, next to that reply, I wrote "Great answer!" and I can remember at the time feeling the little thrill you experience as an interviewer when someone's behavior conforms with your expectations. Because I had decided, right off, that I liked him, what I heard in his answer was toughness and confidence. Had I decided early on that I didn't like Nolan Myers, I would have heard in that reply arrogance and bluster. The first impression becomes a self-fulfilling prophecy: we hear what we expect to hear.

The point here is that the interviewer had decided very early on in the process that he liked the candidate, and so the candidate's answer was always going to confirm that opinion. As the article says, had he taken an instant dislike to Myers, he would have found the answer he gave 'arrogant'.

It's one of my faults, (not being arrogant, well OK, maybe) but I need to pause here for readers to recover from their shock that I do have some - it's a fault that I am guilty of the same crime of forming an opinion when it comes to trading. OK, so forming an opinion isn't the crime, it's the inability to easily change that opinion that's the problem.

Basketball is the best example here simply because there are so many games in a season, and over the course of several months one can't help but get a feel for different teams and for certain players. I have negative feelings about some teams, and positive feelings about others, simply because some have been good to me (by doing what I expected - be that winning or losing) while others have not been so good, either by fading badly or by being brilliant. Of course it's just the nature of the game, and overall I do OK, but when it goes wrong it is immensely annoying and almost seems personal, and when it all goes perfectly, then it's all down to my ability to astutely read the game of course.

So it's hard sometimes to take a detached view of a position. Ideally I trade games where I have no real feelings for either team, and my reading of the game isn't influenced by past experiences, but sometimes there aren't many games to choose from and if, for example, the Celtics cost me money on a Tuesday, then my opinion of them the next day is going to be different from if they had hit a buzzer-beating basket to win for me.

I have never had a good felling about the Lakers - they can be lazy, and Kobe Bryant can't score when I need him to, and when I don't need him to, he takes over games, and can't stop scoring. It's hard for me to put money on the Lakers even when I should - like last night!

On the other hand, my feelings for the Utah Jazz (who incidentally yesterday lost their head coach after a 23 year tenure) are positive because they can come back from big deficits. But in the NBA, any team can do that (well, except maybe for the Cleveland Cavaliers). It's just that I happen to have been on the Jazz a few times when they did it. And I'm positive on the Charlotte Bobcats. They've served me well in the past few weeks, while the New Orleans Hornets haven't. Just about every team evokes some kind of emotional response, even if I pretend it doesn't. I have a long memory, and can bear a grudge for years!

The trick is to take the emotion out of trading of course, but that's sometimes hard to do with so many games and just 30 teams in the league. It must be worse if you closely follow individual sports like tennis and darts, but I prefer team sports for trading.