Don't Ignore the Role of Luck

 | Dec 23, 2011 | 10:55 AM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:








We have some low-volume volatility to start the day. After some early flipping, the bulls are pushing once again. There actually are some signs of speculative action in small-caps which is something that has been missing from this market for ages.

I have positions in a few things I've mentioned lately, like (WWWW), VirnetX (VHC), InvenSense (INVN) and Flotek (FTK), but I have some medical appointments this afternoon so I'm not doing any aggressive adding. I just want to stay very short term and try to book some profits when I have them. I'm not thinking long term at all right now.

This morning I was contemplating an advertisement for an online broker I see on television quite often. A trader says, "Luck? I don't trade on luck." as a way to promote the software tools that the broker offers. I always end up thinking, "What a great idea. Just give me a tool that helps me avoid that bad luck that seems to occur so often."

It would probably be better if they used the word "hope rather than "luck" in this advertisement, but it is more dramatic this way. Traders should always have a rational basis for the trades they make rather than just rely on blind hope, but they'd better be aware that there is no way they will ever be able to determine what Lady Luck might do.

I take luck so seriously that I often think of trading as "luck management." It is inevitable that we are going to be surprised by news. Every trade we make is a gamble to some degree, since we can't predict the future. But what makes us astute speculators rather than wild gamblers is that we develop ways to manage the risks that we are taking. Speculators don't just dump it all on red, cross their fingers and spin the wheel. They make sure that bad luck doesn't kill them, and they try to take advantage of good luck when it strikes.

Don't deny the role of luck in trading. We have to deal with it constantly; the key to success is to manage it effectively.

I have to head back to the hospital today to deal with some minor setbacks on my hearing surgery. I should be back by the close, but if I'm not, I want to wish you a Merry Christmas and happy holidays.

Columnist Conversations

today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
View Chart »  View in New Window »



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.