Long Term Secrets To Short-Term Trading

"
The Most Important Athletic Ability Is the Talent to Comeback from Behind" 
-Harmon Killebrew 
Athletics Are Such a Parallel to Trading 
Maybe it's just my personal athletic background, but I think not. Over the years I've written about 
the similarities between winning on the court, track or field and the pits in Chicago. I don't think it's 
any fluke the most successful bond trader in the history of the world was also a High School All 
American football star, Paul Tudor Jones a pretty darn good boxer, and Frankie Joe an outstanding 
professional baseball player. 

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So, when I heard the above quotation from Harmon Killebrew, I was really rocked. Killebrew, 
Mantle, Jordan, Namath, Ali, were all born with and developed great athletic abilities, but, then so do 
many other individuals, who never become such superstars. 
I've always wondered why that is. What are the differences between the SuperStars and the 
others? I used to think it was media flash, but then noticed guys like Brian Bosworth, Dion Sanders, or 
even Bo jackson never attained superstar status though they had all the trappings of making it. 
There are many brilliant market lecturers, authors, analysts and traders, but the really great ones 
have the same unique quality as Wilt Chamberlain . . . the ability to not blow up when the team started 
losing the ability to turn on scoring power when things looked pretty bleak. That's what makes a 
champion. 
Not raw ability, not learned ability and not luck, which clearly wins some games but never 
establishes legendary champions. Luck is too infrequent and too easy to see when it does appear. 
THE POINT THEN is that as traders we need to devote a great deal of time and energy into 
figuring out how we handle "getting behind" and what our response is. Do we give up, do we fold, get 
angry? Or do we take the emotions of the moment and turn the anger or frustration into not just 
scoring points, but winning the game? 
if we are to win at this game, we must develop the ability to score when we 
are behind; that's the key ingredient to develop in your psyche. 
June 1991
Volume 28, Issue 6 
What Causes Stock and Commodity Market Trends 
Freight Train Theory Explained 
The first 17 years of my market research revolved around trying to figure out when in the heck a trend 
was about to begin, had begun, or was in the process of reversing. 
I read all the fancy math books, studied all the chart systems from Gann to Z charts, got totally lost in 
angles and confused by exponential. I had about resolved that the PhD crowd was correct in their 
assumption that it is impossible to know the trend of a stock or commodity. 

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An Important Analogy 
The problem, they said, is that the market is not a fixed energy vehicle, like, say a rocket. A rocket 
starts with a certain thrust and runs into a certain resistance. Hence, we can measure its speed, project 
where it will go and tell when it is spent. 
The market, though, is more like a ship at sea ... we see its wake ... the chart book price pattern ... and 
try to tell from the wake where the ship is going. That's fine ... if the ship stays on course. 
Our problem is that the ship does not stay on course very often, as external energy flows-new ship 
captains-are always trying to take over the helm and redirect the ship. 
So, while we measure the wake, all we can learn is where the ship has been. The new captain, or even 
the old one, can and will change the course at will ... seemingly without warning. 
From Boats to Trains 
My biggest research breakthrough came in 1983, and then again in 1985, when I discovered what I 
loosely call the "FREIGHT TRAIN THEORY." My theory is that once a train gets rolling to a certain 
speed it is damn well impossible to bring it to an abrupt halt. 
Sure, go ahead and pull the emergency brake ... it will still take time for the train's forward force to 
grind to a halt. 
Ditto, Pork Bellies and Bonds, S&P's or Soybeans. Once any market really picks up a head of steam, it will 
keep rolling, and in the process a trend will be established. 
Critical Mass 
The last paragraph above explains it all ... 
Trend, I always thought (and so does the PhD crowd), was a function of slope, angle, slant, etc. It is 
not. 
Trend is begun by an explosion in price. The resulting new trend stays in 
effect until there is a new explosion in the opposite direction. 

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What happens between the explosion points is the construction or definition of trend, but not the 
creation of trend. Trend is begun with a big reversal and stays in effect until there is a new reversal. 
This means all we have to worry about is catching the explosions and then 
letting the trend that follows take us along for the ride. 
August 1997 
Volume 28, Issue 8 
The Farmer, the Gambler, and the Speculator 
It's an easy game, this business of making money trading. 
There are only three or four rules to follow. But ... you and me ... we overdo the game ... and end up 
pouring money in, good after bad. 
How come? What can we do about it? At last weekend's seminar in Florida, Jake Bernstein shared a 
very telling story. It goes like this 
Several years ago jake was speaking to a brokerage firm gathering of farmers, ranchers and a few 
speculators. After his speech he was asked if he'd like to meet the one customer who made money. They 
said he wasn't very bright, but made money. Always. 
The old farmer and jake hit it off pretty well, so the gent asked jake if he'd like to learn his system. 
"
Sure," Jake replied. 1'd like to see what you do." 
With that, the crusty, aged trader opened up his chart of Pork Bellies and brought out a pendulum on a 
string ... held it over the belly chart and advised jake, 1f it swings up and down on the page, I buy 'em ... if 
it swing cross ways, I sell 'em. There it is, jake, now ya seen my system." 
Jake stepped back, thought for a minute, and then asked, "That's all, there's nothing else to it?"