The Secret of Trading

Oops! Road Sign

In his newsletter yesterday Dennis Gartman admitted that his trading call last week was “wrong.”  In an article excerpting Gartman’s discussion of that mistake one journalist quoted Gartman as follows:

‘Some have asked if we were embarrassed by the one unit short positions in gold and equities and do we wish we’d not done them? We shall answer in a most direct manner: “Nothing we did was embarrassing; they were simply wrong.” Our trades were well designed; the risks were well defined; the technical circumstances were well documented and historically valid… the trades simply went awry. We would not hesitate to do the same trades in the same manner under the same circumstances anytime again in the future; we would not hesitate for even a minute and we wish to be quite clear about that fact.’

First, let us be clear… Dennis Gartman has been a trader and market commentator for a very long time.  Back in the late ’90s when we started our career on Wall Street, Gartman’s newsletter was  “must see” on trading desks at 5am when the fax (yes, fax) came out… especially if one was involved in international and/or commodity markets.  He was not always right (though he was certainly right with greater magnitude), but his writing was always well reasoned.  Further, his explanations were lucid and to the point.  Finally, and most important, he was ALWAYS quick to take small losses rather than allowing them to turn to large losses.  We have no idea what his performance record was, nor do we care.  Whether he was taking his own trade calls or not, he was declaring “out loud” to a few thousand interested readers each day what he thought and what he intended to do, so his winning record was (is) definitely available for anyone interested enough to go through back issues of his publication.

All that said, Gartman’s declaration yesterday that his trading calls were wrong made news not just because he’s generally right, but also because of the sheer rarity of such an admission by a trader.  And yet, as the quote above notes, Gartman recognizes he wasn’t wrong.  In fact, he would take the same trades the same way 100 times out of 100 were they to present themselves as many times.  As he noted, “‘”Trading, as they say, ain’t easy and like growing old, “It ain’t for sissies.” The trick… the “Secret”… the thing that separates those of us who’ve survived for decades in the business from those who light up the sky in a brief blaze and then blaze out like Icarus flying to close to the sun… is that those who survive do so because we know our limits; know our boundaries; we know when we are wrong and we admit it often and quickly. The “secret” is that there is no secret.'”

Now why didn’t we think of that?

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