Comfort Zone

In this market you must get outside of your comfort zone. We preach this at this time to the traders on our prop desk. And anecdotally, Steve and I were at dinner the other night and one of the best day traders from another firm made this same point. You must get into the financials if you do not regularly trade them. You must try and trade the GS’s of the world even with their volatility. You should be trading with more size and hold stocks longer than previously.

One of our better new traders spent a great deal of his time last Sunday at the office with my partner, Steve Spencer. They reviewed his work from the previous week. This new trader was disappointed at that previous week and knew he needed to do better. So he came in and talked with Steve. Steve noticed that he was not in the right stocks and suggested a look at the financials. This new trader had not traded the financials much. He has made his mark in oil stocks and felt uncomfortable straying from that sector. But he did. And last week he made more money in a week than a year’s salary at this previous job as an accountant for a big firm.

Now this young trader is super talented. He will be a superstar trader. But he was cemented the week before because of a small mistake. He underperformed that previous week because he was afraid to step outside of his comfort zone. There are times to stick to what you trade best. But this is not that time. Steve Leisman of MSNBC made a poignant comment on “Meet the Press” that this financial turmoil is like a hundred years flood. The trading action is in the financials. And not being there is just plain poor trading.

This is an opportunity that you will never see again in your lifetime. At least I seriously hope not. Increase your tier size. Jump into the financials. Hold for bigger moves if your stock trades in your favor (make sure you exit if your downside target is reached please as well). Get outside of your comfort zone. If you do your trading numbers can explode.

Good luck with your trading next week!

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