Allure of the Fast Mover

Mark McLeanGeneral CommentsLeave a Comment

So while reviewing my day’s trading film with a senior trader and a group of young up-and-coming millionaires, I was caught taking a position in a “fast mover”. I characterize a fast mover as those times when you can buy a small amount of shares (or large, if you possess the dinero y cajones) and possibly catch a point or two because you are simply involved in the momentum of a sector that is overly strong for the day (i.e. coal, agriculture, etc. in this market). Now don’t be mistaken. I traded MOS everyday until I realized that my swings weren’t worth my profit for that time in my trading career. I decided to leave the beast alone and find the easier, tamer money; that is, the more easily attainable (and easier to retain) versus the quick-come-quick-go mentality that MOS (and its friends such as MON, POT, etc.) provide.

Anyway, I am sure we all can attest to the “allure of the fast mover”. That which may make your P&L that much more delectable in less than a minute as you laugh to the bank thinking of how someone, somewhere, didn’t even notice your little piggyback move on which just made you a point and a half. I relate it to walking through the casino and seeing that table with an open spot where the guys there are laughing and high-fiving and the dealer is on the verge of getting pulled (like it’s his fault). Or, maybe that cute girl that is throwing shots down a little too quickly with a cunning smile on her face as she slyly looks your way…ummm…pause, I don’t know where I was going with that…

Back to the issue at hand. So as I tried to quickly skip over this part of the film, someone noticed I was in the position (that textbook new kid with eyes like an eagle hatchling) and asked “Hey, why are you long when that stock is clearly below the whole?”. I wanted to say because maybe the eye doctor was clearly looking at your mother’s attributes instead of the numbers/letters you were reading from the top line of the board on the door in his office when you were a child; hence, why your eyes are off, wiseass. But  if he instead ran the tape back he would see the potential 80-cents rip I would have taken if the stock did not come back at that time. Of course, when I entered the position I was potentially five cents out the money, but within…ehhh…30 seconds dealing with the stress and related rising heart rate of losing a good deal of money because I was in fact, considering the existing bid, now at least 80 cents out of the money.

I recite this lil’ anecdote (which is completely true, mind you) to disparage anyone reading this bit to stand strong against the “allure of the fast mover”. Yes, as you watch that particular stock run 60 and 80 cents at a time and take whole numbers like Bush and Florida elections, understand that executing a trade in such a stock takes so much more preparation, understanding, tolerance, set up, patience, and unflawed execution than in something else more sane and humane. I think this is best explained by what the senior trader said to me after the young bulls had left the room. He said, “There is no doubt that stock will get to your exit price, potentially two points above your buy price. But what you will go through to reach that price is a whole different beast in itself. And if it is worth it, this video definitely did not depict so”.

“The allure of the fast mover”. Be strong ya’ll…..

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