Papale on Fear

It’s the most wonderful time of the year,  ding dong ding dong.  You know the classic Christmas tune.  Well,  my sense is parents are beginning to sing it about now with  the end of the summer and back to school just about here.  Most of us love summer and spending more time with the kids.  But right about now too much of a good thing might be catching up to some of us.  The  novelty of summer vacation may be getting replaced with bored kids watching hours of mindless TV or beating Call of Duty for the 5th time.  So while were still a few months from setting up  the Christmas tree, for some it is the most wonderful time of the year.

When I was trading at the CBOE a guy I knew made all his seed capital to trade with from playing blackjack in Vegas.  He made his money from counting cards and increasing his bets when the deck was in his favor and pulling back when the odds were against him.  He used the same concept to create a large trading firm that eventually was sold to Goldman Sachs.  As you might imagine the guy was not only incredibly smart but willing to put his money on the line when he saw opportunity.  In fact, the same person is credited with turning the market on the Tuesday follow black Monday, October 19, 1987.

Story is Morgan Stanley went into the old MMI index at the CBOT, which is a stock market index,  and needed to sell 1000 futures contracts. No one in the crowd would give them a market.  This guy, whom I’ll call Mr. Big, was there and stepped up and gave a price where he would buy all 1000 contracts.  The trade was executed and as history proves, was the absolute low of the market.  Mr. Big made several million dollars that day.  Nice trade.  Point is fear and over analysis can sometimes cause us to freeze and do nothing.  There were 20 or 30 other guys around that day in the MMI that could have gotten in on that trade but didn’t.  Be smart and manage risk.  But don’t let fear and over thinking cause you to not trade when your plan says to trade.

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