An Organizational Look at Trading

You’ve got to be very careful if you don’t know where you are going, because you might not get there.” Yogi Berra

Becoming a successful trader, is a constant battle with one’s self. Maintaining both a long-term and short-term view can become confusing. One of the reasons I believe it to be so, is the desire to break trading down to rules. But different rules are needed at different times.

This is one of the many lessons you can learn from the way a Major League Baseball team is put together.

There are so many differing viewpoints. From the owner, to the General Manger, to the player. Each one has a unique set of both goals and challenges.

And in many ways they each represent a rung on the thinking involved on the investment ladder.

Where to start- Ownership

The Owner of a Baseball team has two goals.

1- Win a Championship

2- Lose as little money as possible while pursuing #1

An investor/trader before pursuing any trade needs to think that way. What is the ultimate end goal of an investment?

Providing a return, and risking the least amount of capital in the process.

The General Manager- Handing off the keys

To be a successful General Manager requires proper preparation. Building a team, in a sport full of uncertainty means identifying all types of varying talents. Hitters, runners, catchers, pitchers, coaches, and of course a field manager they can work well with. In addition, they need a scouting department. As well as an analytics department, and a sports medicine department. Just to name a couple.

Building a team, like building a portfolio, requires being prepared for all types of challenges and opportunities. Defining the tasks required, and who and how will they be accomplished. What facilities do you need to execute? Who are your key advisors on issues such as tax, legal, and risk management. Lastly, it is about managing the short term emergencies – within the context of the ownership’s goals.

The Field Manager- Getting the Best out of Everyone

The Field Manager’s mandate is the transition from tools to practice. Their role is to see firsthand the talent that the General Manager has accumulated, and to deploy it as necessary. To win that series, that game, or that inning. Of course, their job requires an adherence to the future. But, for the most part the time frame shortens. When to use, or rest, a player. Which plays to call, and when.

So you decided to take a position in a market. When to execute, and which tools to use? What is the environment like currently? Should you use options? Where is the stop loss? These are examples of questions a trader/investor needs to be answering.

The Batter- When to Swing

You ever hear someone describe their trading using the following analogy: Even a great hitter makes an out 7 out of 10 times.

A great hitter doesn’t squander their at bats. They know that they will be beat. But a good at bat isn’t about the result. It is about knowing when to swing. When the pitch isn’t in your sweet spot. So they pass, knowing that something better is coming.

Learn how to assess trades. How their short-term movements influence your thoughts about them. Should you have a larger or smaller position? Is something else going on in your life that affects your decision making? How can you rid yourself of the noise, to focus on what it is that you are trying to achieve?

Viewing the various stages of your trading as different stages is important. Each one unveil various issues. By viewing it as a hierarchy, with alternating goals and challenges, like a professional baseball team can help. Becoming a champion, is when they all fit in together.

Like a Glove“. Ace Ventura Pet Detective


related posts

Drop a line


We turn our experience into insights that you can use to do more with your money. Get in touch.

Scroll Up