I know right now you’re thinking this guy is nuts but if you stick with me for a minute
this will make sense.
We learn several valuable traits in fishing that can make us much better investors.
Most importantly we learn patience. Whether you prefer fishing from shore, a
boat, or fly fishing the one thing you learn is that just because you are ready to
catch fish that doesn’t mean the fish are biting just then. So we just keep trying
until the fish decide that they are hungry. Although we stay watchful and are
anticipating a fish biting at any moment, we don’t over react by throwing out a
dozen lines or using dynamite, we patiently wait till the time is right. So how does
this make you a better investor? Well that same trait of patience will make you a
much better investor. Just because you are ready to buy, doesn’t mean the stock
market is ready to “bite”. We need to prepare, anticipate and be ready to buy but
we can’t force the market to move when we want it to. We have to wait for the
correct set ups to occur before throwing in our line. Too many investors are like
the fisherman who is at one lake, hears that the fish are biting somewhere else
and so packs up his gear and heads for that fishing hole. By the time he gets to
the previously reported hot spot, the fish have quit biting there and so he starts
listening to more reports of where the fish are now biting. The problem is that this
poor guy is always the last one to the party and at best will never get more then
some leftovers. Way too many investors are just like this they are constantly
chasing stocks and getting to the party too late. If they would learn more patience
they would find that they are in the right place at the right time more often.
Of all sports this one has to be the most frustrating to learn to play well. What this
sport will teach you is concentration and just how important very minor changes
have dramatic effects. We may know exactly how to stand, how to hold our club,
and how to swing, but if we don’t do all those things exactly right all at the same
time we receive a less then favorable result. It also teaches us that all the
practice in the world won’t make us any better if we are not practicing perfectly
correctly. How does this relate to making us better investors? Well we know that
we need to “buy low and sell high” but what we need to do is practice entry points
and our exit points. What we should be after is the “sweet spot”. Just because a
stock is down from where it was previously, doesn’t mean it is now a good buy.
At the end of course we need to know when a run is over and move on to our next
play. You know when you hit a golf ball just right, you can hear that you hit that
“sweet spot” and even if you lose sight of the ball you know it’s going to end up
right where it was supposed to go. The same goes when buy stocks, you will
know it when you hit that sweet spot. What you need to do is learn from all of your
trades both the good ones and the bad ones. To become a better trader, you
need to practice and you need to review your results. You need to learn the set
ups that produce the right results and then look for those set ups in your next
trades. It’s not a guarantee that the results will repeat but at least you are putting
the odds in your favor. When your trades don’t work you need to study what was
different in the set up that might have given you a clue that this time was different.
Just like in golf there are many facets to a good trade. It’s not just a matter of
price increasing, we must also pay attention to the other facets such as volume,
rsi, moving averages etc.