“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime.”
Of all the brilliant things Jim Rogers has ever said, I believe this one is head-and-shoulders above the rest and is a guiding philosophy I adopt EVERY week when trading the markets. I thoroughly recommend you do the same
Rogers is one of the most successful money managers in history. He made so much money investing and trading during the 1970s, he left the conventional side of work to travel and run his own money. You can read more about him in the greatest trading book ever, Market Wizards.
In that short quote above, Rogers nails one of the most important factors to trading and investment success: Don’t spend your time and energy chasing mediocre trades and investment opportunities. Only move when the odds are overwhelmingly in your favour. If you follow his lead, you’ll probably end up a very successful trader. If you don’t, you’ll contribute to the bank accounts of those who do follow his lead.
In this week’s video, I run through a trade I took this week on GBPNZD. I discuss the reasons why I took the trade and why these reasons put the odds of the trade working out, heavily in my favour. I wanted to use a real trade (sent out on the trade alert service), rather than anything hypothetical, to make the message that much more powerful.
You see, the average market participant always feels like he has to be “doing something.” He chases all kinds of ideas… takes lots of “fliers”… acts on all kinds of magazine articles, CNBC shows, and hot tips from buddies. He’s always on his phone or computer checking quotes. He usually has a bunch of trades in his portfolio that are down big…but are sure to “come back.”
Remember my previous video, ”Want to become a trader?” Here I run through the best parts and worse parts about being a trader so those considering becoming one could make an informed decision based on both the positives and negatives. One thing I identify (and is something I still struggle with) is ‘work guilt’ whereby you feel guilty when you are not in a live trade as it doesn’t feel like you are working when in fact, staying out of the market is some of the hardest and most critical work you will do as a trader.
Not Jim Rogers. In all his books, interviews, and articles, Rogers makes it clear he spends long stretches of time without having significant money at work in the market. He waits for extraordinary opportunities, where the odds are so far in his favour, the position is like picking up free money. When he doesn’t see any sure things, he simply sits in cash and does nothing.
Now, don’t get me wrong. There are few 100%-can’t-lose trades and investments in this world. I’m not encouraging you to find trades that carry no risk of loss. I’m encouraging you to find trades where the odds are heavily stacked in your favour. Find the sorts of “extreme” opportunities I’ve written about before…where the sentiment toward an asset is shifted to one side…where the exchange rate is ridiculously expensive or ridiculously cheap… and where the market is moving in the right direction and confirming your thesis. Only then should you commit a % of your hard earned capital to a trading idea.
If you’re not seeing any extremes, it’s best to fight the natural urge to stay busy and make “this might-could-kinda-work” trades. These trades will just distract you, cause stress, and run up your commission bill.
Most older, rich investors and traders will tell you they made most of their money on five or 10 positions they had tremendous conviction in…where it felt like they were simply picking up free money. They’ll tell you the other positions weren’t worth the time it took to put them on.
To sum up: Be lazy in the market. Don’t feel bad about sitting on a big pile of cash, waiting for low-risk, high-reward trades. It’s the idea behind “free money” trading. It’s the thinking that built and maintained Jim Rogers’ wealth. It can do the same for you.
Until we speak next
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