There is basic risk and money management we should all follow… 99% of the time. Then, there is the time to hunt for the whale, often frowned upon by the mass of traders and rarely taught.
I believe some life changing gains are achievable via this type of hunting, but like hitting a time buzzer, game winning 3 pointer, skills and practice are required. (+10 years effective trading experience).
Credit to Plunger (Burt Coons) for highlighting this out. Requisites before attempting a whale hunt are expert level experience in sector, extensive research and most importantly patience. This will lead to the conviction build-up required to buy right and sit tight. With a huge position size… draw downs along the way will require huge conviction.
Here is a nice story to outline this thinking…
Many years ago when I was living in Paris, we were out clubbing with my Parisian friend Aziz. Parking on a Saturday night, or ANY time in Paris is practically impossible.
Most people would do circles around the night club they wanted to go into… eventually settled for a parking far away. Not fun on a rainy or cold night, especially in the company of a fine date!
But Aziz had a plan. He knew Paris inside-out. A real insider and a great pleasure for me to learn that beautiful city.
He would go straight up on the beginning of the street block where the club was. He’d double park and wait. He wanted to be effective with his time… Avoid the in and out going all over the place, to finally settle on a parking that wasn’t an A++ setup.
Without realizing a life lesson I learnt in 2003, would later help my future trading career Aziz was the first to show me “whale hunting”!
With a little patience and after some cool talks in his car… I said… “Hey Look Aziz.. that guy in front is leaving!”. Right away we moved in and took that empty spot.
We won BIG! All we had to do was be patient and understand our environment. We wouldn’t feel in a rush to leave the club early, knowing the car was right in front. If we had forgotten something inside the car… well it was 30 secs from the club. If it rained, well we’d be steps away from the car. Win-Win-Win.
You could say that we got lucky, but that time we waited doubled park was our “risk”. 9 times out of 10, we’d be parked within 30 minutes… that was our experience, research with led us to have conviction, leading to patience to wait it out.
You can easily over trade in a bull market… and not make much money… wasting your most important capital, your time!
Do your home work, and when the time is right, you’ll find that perfect parking spot (bull market) and will take it (buy right). Then, have fun in the club until last call (sit tight)!
Here are some notable pointers on the logic of events from this “whale hunting manual”
- When max fear… go contrarian when chart shows early signs of recovery. Create an over sized position while you get assets at a discount.
- When fear subsides and replaced by greed… scale back from the over sized position to regular sized position (sell into greed at a premium).
- When pullback occurs, you can survive and have ammo to buy again on the “cheap”, as the “fomo buyers” who went in over sized at the wrong moment (into greed) buying at premium, need to sell on margin calls.
- Rinse and repeat as price action stays above 1 year or 3 year inclining simple moving averages.