In Trading, As In Life, Hope Is Not A Strategy

Hope is a killer of all dreams big or small without action.

Away from the street of dreams, Wall Street, and far away from youth, I’ve concluded that hope, the four letter word that drives some people to ruin and others to soar with the eagles, is in fact a killer of dreams if not put into perspective.

In life’s milestones we hear about hope incessantly. Our toddler, the one nicknamed Lucifer, goes off to school, we hope the child adjusts well and finally learns to share. Upon grade school or high school graduation we hope the kid looks forward to higher education and hope he’s learned that detention was not a course for credit. We hope things work out.

The kid, now calling himself Gordon Gekko and out of some unknown B school, hopes for a great job, great money, and great prospects.

In his/her career a person hopes for more of everything: promotions, income, vacations, etc.. Facing retirement, he/she hopes they’ve planned well and hope they’re ready, hoping their health holds out.

In trading the stock market hope is alive and well, whether we admit it or not. Maybe we didn’t do our due diligence. We were lazy. We know we didn’t follow a plan, yet we still enter that trade hoping it does well. We’re not sure, so we hope. At least we’ve got that going for us in this trade.

Whether in life or trading in the stock market there is always hope, we tell ourselves. By this we mean that we look forward anxiously, optimistically, desiring that something will happen the way we want it to, that it will be true, and that it will fulfill our expectation.

Hope has us expect an outcome as we visualize it, as we want it to happen in the best of all worlds. However, beneath all that hopium, the addictive feeling of related positive expectations, what do we control to affect the outcome? Once committed to hope, we often discover we control little to nothing and we are aware of that as well.

We’ve put ourselves in a situation whose outcome is not guaranteed. To avoid any sense of concern, we hope.

Now before you comment that I’m just a curmudgeon, a bitter man who loves tramping out soaring flames of dream fires, you need to know that I am the opposite. I too have experienced hope in all it’s forms… the hope with reason, as well as mindless hope.

Yes, I’ve been there, done that, got the T-shirt.

In life, as in trading, we’ve either prepared as best we can, and then have a reason to be hopeful; or we haven’t done all we can (and we’re aware and afraid of this fact) and we turn to hope as a way of alleviating any signs of impending angst as we await the outcome.

In training of wanna-be traders, and  in dealing with experienced traders, I find hope is impossible to eliminate. When we take a trade we have put something in motion, but unlike Newton’s laws, we are unsure of the reaction to our action. Market action is unpredictable, unlike Newton’s observations of motion, action and reaction. Price may or may not go in our direction.

The danger of hope, in trading at least, is that it often is used as a rationale, a reason unto itself to risk money and thus we hope for the best.

In life, we can genuinely hope as long as we have a valid reason to think that the gods will favor us since we’ve done the work, also known as paying our dues. A student studies for years and years hoping for his/her PhD. A writer learns his/her craft over the years hoping for a best seller. A trader in the stock market learns his/her craft as well and hopes for those home run trades.

These types of hope are realistic relative to the amount of effort and preparation performed.

The killer hope is the one not supported by a bona fide reason for being hopeful in the first place. It’s the hope against hope but still disguised as hope.

Killer hope is practiced by folks who fly through life, or a market trade, by the seat of their pants. In spite of the lack of preparation, this person will put something in motion knowing the odds are against him. He/she simply hopes they’re right, like a stock picker throwing a dart to pick his trade.

Hope is not a strategy in life, nor in the stock market. Hope is a verb and a noun. As a verb, hope is meaningful only with a reason for being hopeful. As a noun, I guess it all depends on the outcome of a hope whether it’s a positive or negative.

In the end, I’d rather have a world where genuine hope is based on past actions creating the expectation. I am aware that hope without action is meaningless.

I hope you got something out of our little tete-a-tete here today.


About wallstreetpirate

Thirty-five years in financial services from insurance to registered investment adviser, and trader (now retired). Currently helping wanna-be traders and experienced alike as a trading coach and mentor. I've been in and around, on top of, in the middle of, and on the bottom of the stock market for a long, long time. Here's all I've learned: Trading is about behavior, psychology, and appreciating what the charts are saying technically. You can't fake it. Either you know what you're doing or you don't. And as much as this isn't rocket science, it takes knowledge and a skill set to survive.
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