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What Shaq Knows About Trading That You Don't |
By Prof. Jeffrey Bierman, CMT
I finished my last undergrad class this semester. |
Done teaching at Loyola until January when the grad course picks back up. |
Walking through campus in that freezing wind, I kept thinking about something Shaquille O'Neal said. |
An interviewer asked him about being worth half a billion dollars. |
Shaq said he would not tell them exactly how much he had. But he could tell them this. It is not how much money I make that makes me wealthy. It is how much money I keep. |
One of the greatest lines ever. |
I have friends who brag about making three hundred thousand a year and they are broke. I know traders who post screenshots of winning days but cannot show you their account at year end. |
This weekend I want to talk about the lesson that took me 38 years to really understand… |
…The lesson that separates people who build wealth from people who just make money. |
The Genesis Cog Scanner helps identify when to act. But knowing when not to act might matter even more. |
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The Privilege of Teaching |
There are only 15 or 16 finance professors in the entire department at Loyola. I am one of the select few. |
I take it seriously. It is a privilege to be an instructor. |
Thursday I learned that 114 staff and professors were laid off from the business school at DePaul. It is not a right to work there. You can be laid off at will any time. |
My job is secure because I deliver. When I deliver for them, I deliver as well or better for you. |
But here is what I keep telling my students that they struggle to understand. Wall Street is not theory. It is reality. You have to blend them. |
I can read a balance sheet and financial statement in 17 to 20 seconds and tell you exactly what a company is doing. Right or wrong, but it makes sense. I have been doing this since I came into my mother's womb. |
That is not bragging. That is 38 years of pattern recognition. And the biggest pattern I have recognized has nothing to do with charts. |
Why Most Traders Fail |
More money is lost not from being on the wrong side of a trade. |
It is from how you weight your position sizing. |
When people say they are loading the boat with 10% or 20% positions, they have literally opened up the can of worms to blow their account out. Everything I do is 2% to 5% positions. |
I contain the damage all the time. No matter what the situation is. |
Because when you hit your account hard, and I am not speaking to you because it has happened to me 30 or 40 years ago, it is almost impossible to come back. |
When you put in ten thousand and wake up at five thousand, you are done. Not financially done. Mentally done. |
That lost capital is also lost mental capital. It makes you want to quit trading. |
The only way to stay in the game is to consistently manage risk and contain damage. All the time. |
The Two Barriers That Matter |
If someone asked me to summarize everything I have learned in one sentence, I would tell you this. |
The two most important things are psychological approach and position sizing. |
If you can pass both those barriers, you can survive forever in this business. There is no other way to do this. |
I preserve and build wealth by getting out early and getting in early. I am always early out and always early in. |
That is how every billionaire did it. Not by chasing what is already expensive. Not by loading 20% positions into momentum trades. Not by confusing making money with keeping money. |
What December Teaches Every Year |
This week I watched traders trying to short a market that will not go down. I watched them buy dips that turned into trap doors. |
The algorithms have this market locked in a cardboard box through year end. Window dressing. Performance gaming. Bonuses to protect. |
I told everyone in the Genesis COG this week. Do not fight these algos. They are setting up for a lower leg down. It may not be this month. But it is going to be January or February. |
Why wait? Why wait a month? Get out now like I am doing. |
That is how I preserve and build wealth. I get out when the time is right. Not when the pain forces me out. |
The economy has not fallen apart. But it is weakening slowly. The knees are shaking. |
When it gives way, you are going to get that slip and slide. We are right on the edge of that slip. So close. |
What I Am Doing This Weekend |
I am going to enjoy time with family before the holidays really start. I am going to let my grad course prep wait a few more days. |
And I am going to sit in positions sized so small that whatever happens Monday cannot hurt me. |
The Genesis COG System tracks exactly when conditions change. When the algorithms stop defending support and start attacking resistance. When the programming that protected every dip flips to systematic selling. |
But the system does not make you wealthy. Keeping what the system helps you make is what makes you wealthy. |
Shaq understood that. I understood that after 38 years. My students are starting to understand that. |
This weekend, ask yourself one question. |
Are you focused on how much you are making? Or how much you are keeping? |
The answer determines whether you are building wealth or just trading. |
Have a warm weekend. Monday comes fast. |
Professor Jeffrey Bierman
Creator of the Genesis COG System |
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