At the Trading Triangle in Maui, I was having a pleasant tropical breakfast with three other traders when I realized, with horror, that I didn’t fit in! Not because of my trading ability or my gender (yes, I was the only woman there – where are you, ladies?!?) or even my hair (festively colored for the tropics) but because I…wasn’t a pilot.
As I was sitting at a table for four, three of whom were pilots, my statistical brain immediately started noting how unusual this was. Since the next question my brain inevitably asks is “I wonder why?” (yes, I drove my parents crazy when I was a kid), I chatted more with them to see if I could get some answers. One of the things that struck me as being important for both pilots and traders is simply:
In fact, in chatting with one of them (*waving* Hi, Travis!, Successful Options Trader of the Month – April 2016), he mentioned that even if the outcome of an event is good, if they didn’t execute the steps leading up to the outcome by following The Plan, there would be severe consequences.
Did you hear that? Even if they saved all the passengers from certain death, if they didn’t do it in the right way, there would be Trouble in River City.
As it should be. In times of crisis and panic, it’s absolutely necessary to follow a plan that was created in calmer times, has been tested thoroughly and requires no higher-level decision-making skills.
I’ll bet that none of these guys (Options Trading Pilots – ladies, calendar?) has EVER had a problem following his plan and yet it seems that’s something many new traders struggle with in the beginning. (It also makes me wonder how many wash out of pilot school because they couldn’t internalize the concept of always following the plan.)
If following a plan is important enough for someone who’s piloting an aircraft, why isn’t it important for traders with money on the line?
I have no idea because it should be. Granted, lives are more important than profits but shouldn’t you approach anything you do with the same sense of importance? Shouldn’t you trade with the same discipline as you’d pilot a plane? After all, if you blow out your entire account, lives MAY be on the line – just ask your spouse.
Another interesting observation I made was the calm demeanor of my breakfast mates. In fact, when we found out about Brexit during the luau, one of the pilots (*waving* Hi, David!, Successful Options Trader of the Month – November 2015) came over to our table to chat. After a while, he shrugged and said with a slight smile, “It doesn’t really matter. If you’re down money, it’s already gone, anyway.”
“It’s already gone, anyway.” Brilliant concept! Think about it – how often do you stay in a trade too long because, by golly, you’re going to make that money back! You’re going to dig your way out and still going to make a profit!
Now, what if instead, you had the idea that it’s already gone, anyway. Would you leave your M3 near max loss, knowing that if the market doesn’t cooperate, you’ll be well BEYOND it the next day? Would you really roll the dice? Or would you just take your loss, shrug and say with a small smile, “It was already gone, anyway.”
Hopefully, you’d do the right thing: Take the loss. You’ll survive it. What WILL kill you (as many, many veteran traders have found out!) is thinking that it’s NOT gone. That you can still get it back…so you take on too much risk. Maybe it works this time but, eventually, the market EXTERMINATES those who play games with it.
Finally, have you ever seen the cockpit of a commercial jet? All those buttons, dials, gauges…which is the most important? A pilot has to look at all of them simultaneously and immediately focus on the one that needs attention while ignoring the rest.
Sound at all like looking at an Analyze graph? Where’s the problem in your trade and what causes it? What options in the trade are just burbling along fine that you can ignore? And how quickly can you make those determinations?
I learned a lot from my “Breakfast with Pilots”. Their discipline, their adherence to plans, their ability to absorb tons of information and parse only what is important…is it any surprise that our pilots are top traders?
And just darned nice guys, to boot.
Written and contributed by Cynthia Sarver, Successful Options Trader of the Month – February 2016
Raymond Joseph says
Cindy, you had me with “You got trouble my friends, right here in River City…”. As you and Stephen sadly learned (during a several hour car ride with Seth and I) in Maui, I am a movie buff. Any references to movies (I even love musicals – Music Man being one of my favorites) and I am hooked. Great article, as always. Thanks for helping all of us learn to better pilot our trades into landings we can walk away from.