The Crosshairs Trader Blog

STOCK TRADING IN A “HAPPY ZONE”

I believe traders have much to learn from the successful habits of those on the other side of the “Street”.  Case in point: the legendary baseball player Ted Williams, considered to be one of the greatest hitters of all time.  Williams had both natural born talent and developed talent. It is the developed talent that I wish to discuss here. 

Williams “learned down to the percentage” (THE SCIENCE OF HITTING, p. 36) what pitch worked best for him. His preferences were found in his “happy zone” where he could hit .400 or better.  Outside his HAPPY ZONE the percentages decreased to as low as .230.  In the graphic below you will find Ted Williams’ HAPPY ZONE outlined in green.  The low percentage zone is outlined in red.  The general strike zone is outlined in black.  Williams’ explanation to the right will be our point of focus.

 

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What does Williams’ HAPPY ZONE have to do with traders and what can we learn from it?

1.  FIND WHAT WORKS FOR YOU  “Since some players are better high-ball hitters than low-ball hitters, or better outside than in; each batter should work out his own set of percentages.”

Clear enough?  Each trader must find what style works best for him, whether it is long term investing, swing trading, scalping, etc.  and what instument works best: options, stocks, forex, futures, etc. What worked for Ted Williams worked for Ted Williams.  He did not focus on the hitting style of his opponents or teammates, nor did he focus on their percentages trying to figure out the secret to hitting.  The secret for Ted Williams and for you as a trader is to find what works best for you.  The process will  take time but once settled upon higher winning percentages will follow. 

2.  STAY AWAY FROM WHAT DOES NOT WORK each should learn the strike zone and not swing at bad pitches.”

If you have found the HAPPY ZONE do you step out of it anyway?  If so, your winning percentage may suffer.  You may go from 80% wins to 40%.  Is it worth it to stray just so you can be in the game?  Is it such a bad thing to walk away from the trading desk when your charts tell you there is nothing to trade?    Because he waited on his pitch he was able to amass an impressive hitting history:

  • Lifetime batting average of .344 (7th best in history)
  • 521 career home runs (3rd best when he retired – 15th best today)
  • Career on base percentage of .482 (best ever)
  • Two Triple Crowns (1942 and 1947) and two MVPs (1946 & 1949)
  • 1,839 RBI (13th best)
  • 6 batting titles and 4 home run crowns
  • Led A.L. in slugging 9 times, in OBP 12 times, and in OPS 10 times
  •  

    With this record he is currently still number 4 overall in base on balls!  Williams loved to hit the ball and his record proves it but he was also willing to wait for the next at bat if he did not get the pitches he wanted.   If he had a choice to walk or increase his chances of striking out, he chose to walk.  How much more money would we have in our trading accounts if we walked more often than taking a chance on low percentage trades?

    3.  THE BEST HAPPY ZONE IS THE SMALLEST  “Swing at pitches just two inches out of the zone and you will be a .250 hitter.

    Look at Williams’ HAPPY ZONE in the green area vs. the strike zone in the larger black area.  There are 77 total areas in the strike zone vs. the 18 total areas in the HAPPY ZONE.  Williams’ success as a hitter was based on waiting for the pitch to come to him in a relatively small area instead of chasing  pitches that were not his.  Do you wait for the trade to come to you that meets the  parameters as set forth by your HAPPY ZONE?  Or do you chase after trades outside your HAPPY ZONE?  There are hundreds even thousands of opportunities to make money in the market on any given day so why chase after all of them?  Why not find one or two simple ways to exploit the movements in the market and let all the other pitches pass you by?  You may find that you are not missing much.  In fact, while others around you are striking out you are running around the bases scoring again and again.

    Do you want to stay in the trading game?  Find your HAPPY ZONE, draw a box around it, and do not stray from it.

     

    “HITTING IS FIFTY PERCENT ABOVE THE SHOULDERS”  Ted Williams

     

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