Be The Tortoise And Not The Hare

The old tale about the race between the tortoise and the hare lives on. 

 

In media and markets, we see an insatiable desire to get the news or new trend out first rather than correctly.  Oh, when you combine the two it makes you look good and in trading you probably end up making a nice profit.  But as we all know trying to time turns and events often has dismal results.  Economists feel the same, that is why they call economics the 'dismal science'.

 

In trading and investing, the rush to be first can be accompanied with false starts, traps and reversals.  Recently we saw most of the indices making a nice staircase run to/past all time highs.  The naysayers were out in force and continue to this day, saying the markets have topped and are doomed.  As we know too well, the last top is the most important one, and that is nearly impossible to time correctly unless you are a lucky guesser.  Guessing is not a good option for trading or investing.

 

The motivation to get it right is very different than the motivation to be first.  The all confident predictor (the hare) wants to be the first to recognize a change or an event and if wrong cares little about the consequences.  They are not confident a trend will continue onward so they jump in first and often jump out first as well.   

 

Meanwhile, the one who waits to be right (the tortoise) wants to see confirmation first rather than the first step.  This person is patient and often late but manages to still get on board a trend because their confidence level is high that a trend will continue.  

 

Last week saw the markets down sharply towards the end of the week and confirmed a short term downtrend on Friday. If you got in too early you probably had to live with a bit of pain before the move down.  If you waited for confirmation then you can get on board (add some puts?) This may continue for a bit longer but the trend will change again, and probably very quickly.  My advice is to be the tortoise and not the hare, win the race in the end.  Wait for the move to happen and then confirm the move, then make YOUR move.