Stand apart from the crowd at all times. Be the first in and out of the profit door. Your job is to take their money before they take yours. Be ready to pounce on ill-advised decisions, poor judgment and bad timing. Your success depends on the misfortune of others.
-- Alan Farley, The Master Swing Trader, 2000.
OK, it's not Sun Tzu or Jesse Livermore, but I think it makes the point. I'm attacked whenever I talk about trading with a predatory instinct. These obvious "sideliners" accuse me of contributing to the fall of civilization by not playing fair when it comes to the markets.
I call them sideliners because it's obvious they don't trade, nor do they have an appreciation for the laws of supply and demand. In their naive vision, the markets are evil and need to be reformed so they can take advantage of its opportunities. In other words, they never made a dime trading in the real world.
Welcome to the myth of the democratic markets. After two decades of unrepentant greed, we've spent the last three years atoning for our sins, and looking for scapegoats. This self-deception has been so effective we now believe we'd never have bought bubble stocks if "they" had only told us the truth. Yeah, right.
What better entertainment in these mea culpa times than watching a successful woman being prosecuted to the full extent of the law? Undoubtedly none of us would have acted in the same manner had ImClone Sam called us up on that fateful day. At the least, we wouldn't have been caught so easily or fought so hard to prove our innocence.
The markets have never been a pretty place. Just ask the Dutch traders who bought into the tulip mania back in the 17th century. You think 'Net stocks were bad? Imagine paying $10,000 for a single tulip bulb, sight unseen. Where were the enforcers back then, when they were really needed?
If It's Not Broken ...
I like my markets just the way they are, warts and all. In fact, capitalism would get a lot worse if we didn't have a good place to make bad decisions, at least between 9:30 a.m. and 4 p.m. EDT. Maybe that's why I cringe whenever lawmakers or prosecutors step onto that sacred ground.
I earn a living when other people put on their dumb hats, and buy too high or sell too low. Traders like me don't build bridges, sell suits, or lead flocks to salvation. We contribute nothing to society except pure liquidity and an aggressive attitude. I wouldn't have it any other way.
Traders work directly with the machine language of world capitalism. It's the only profession I know that doesn't depend on a boss, a company or an economy. At its core, trading feeds ruthlessly off the excesses of the marketplace. It just wouldn't be the same without all the manipulation, misinformation and monkey business.
Many former investors now hate the markets and anyone who prospers through trading or speculation. With biblical fervor, they believe justice must eventually rain down on those who still appreciate the marketplace or prosper from its existence. Amazingly, many of these folks still follow the markets every single day. Talk about self-abuse!
I have a standard response whenever I get flamed about my continued faith in trading, capitalism and the modern markets: Why waste your time if you're getting angry and upset reading the financial news? Take up knitting instead, or better yet, join a political party. I'm sure you'll be much happier in your misery, and Mr. Market will be a much kinder gentleman without your attendance.
To quote a famous fictional trader, greed is good. Greed pays the bills and gets the kids through college. Greed also performs an important community service. It relieves the misinformed of their excess capital, and gives it to those more deserving of its ownership. Greed greases the engine of market inefficiency.
Traders need to be greedy to develop the predatory style required to prosper in our modern markets. This may be distasteful to folks who still believe in the tooth fairy or Robin Hood. But the rest of us understand there will be a loser for every winner. And everyone who plays the markets has to choose whether to take or be taken.
