Millionaire Tradersterms, getting repeatedly stopped out and then trying to reenter
at worse levels) and from the occasional punches he was taking
from Ali (in trading terms, the actual capital losses related to the
stops getting hit and possibly not being able to reenter at favorable
levels). Foreman was visibly finished by the end of the fifth round
and eventually knocked out in the eighth.
If Clint Eastwood can take great trading advice and apply it
to boxing, perhaps I can take great boxing advice and apply it to
trading. The greatest boxing advice I could find inverted a boxing
sin and converted it into a favorable outcome against great odds.
This advice came from the greatest boxer of all time, Muhammad
Ali. Thank you, Muhammad Ali, you have always been a hero.
My commodity trading version of rope-a-dope is to take a com-
modity trading sin. That is, not cutting losses quickly and then
making it worse for a brief period of time and space—but don’t
expose yourself too long—by adding to the loser trade. I have
found that in the long run I am achieving better results, behaving
with better discipline and emotional control than the people who
mindlessly cut losses too quickly and won’t even consider averaging
down to improve odds. Warren Buffett once said, “I buy a stock I
like for 100, it goes to 90, I still like it, I buy more. How is that more
risky?” Just like Warren Buffett, I also have trouble perfectly tim-
ing trades. This strategy has at times enhanced my performance
in spite of my initial poor timing. It definitely involves superior
discipline and emotional control—try it sometime—than someone
who allows themselves to get whipsawed too soon out of a per-
fectly good trend. My risk is increased for only a very short period
of time and movement. Be careful about exposing yourself for too
long. My opponents are getting tired out both in terms of physical
capital and mental capital due to the fact that they got thrown out
of a good trade too quickly and now must try—and I emphasize
try—to reenter later, most likely at higher prices, and with less real
capital and less mental capital than when they started. Constantly
getting stopped out and trying to reenter trades is very tiring from
both a mental capital and physical capital perspective.
Please, don’t take trading lore for granted. Step back and try
to take a more mature and sophisticated view of how to achieve
results. “Whipsaw is for losers!” Did you ever consider that? If so,