Lesson 23: Mrs. B's Operations Manual
Mrs. B has a book she calls an operations manual. She refers to this
book from time to time making changes, adjustments and comments where
appropriate. This operations manual of Mrs. B is not the same as her
trading plan. You might visualize this book as similar to the manual
that an airplane mechanic might have for servicing an airplane and
getting it ready for flight. The pilot has the flight plan. The
mechanic has the service manual. Mrs. B has both. The
first principle that is enumerated in Mrs. B's operations manual is this:
Simply put, this principle means that a trader should be able to come
up with a trading plan that will defeat any given market. An
intelligent trader should aim to develop a plan that will be
profitable over the long run. The second principle in Mrs. B's
operations manual is as follows:
The lack of sound money management policies will, over the long
run, defeat even a well-defined trading plan.
Mrs. B knows that just as no airplane can fly far without oil in its
engine, no trading plan can last long which does not incorporate
sound money management policies as the fundamental lubricant on which
the trading plan is based. The third principle in her operations
manual is this:
The greatest opponent any futures, options, or equity trader faces
will often be himself or herself.
Wars have been fought, kingdoms lost and chances taken simply because
as humans we often cannot stand to suffer loss, embarrassment or
insult. Purchasing a futures contract at $1.40 and watching it
decline to $1.30 is often viewed as greater than a loss; it is an
embarrassment. It might even be considered an insult. Whenever a
trader views a decline in prices in such terms, the trader will have
compounded his or her difficulty in achieving success in the futures,
options or equity markets. Finally, in today's lesson, for her fourth
principle, Mrs. B lists the following:
In futures, options, or equities, a trader may have a plan which
focuses primarily on using a "markets approach" or a "methods
approach" when analyzing potential trades. It is not always
clear which approach is the better and sometimes a combination of the
two proves to be the most satisfactory.
In lessons eighteen and nineteen, we saw that Mrs. B was considered a method
trader. If Mrs. B were to buy and sell shares of stock in
corporation 101 and no other company then she might also have been a market
trader.
These are the early principles of Mrs. B's operations manual. To
continue reading, simply click on the link below. Before you do that,
however, if you have any comments that you would like to send to Mrs.
B concerning this introductory material, or suggestions you might
have for her, you may send those comments along in the form of an
e-mail by directing your mouse arrow to this e-mail button below.
To send Mrs. B your thoughts by e-mail, click
here or on her mailbox.
After sending Mrs. B your thoughts, suggestions, or observations, you
may then proceed by clicking here.
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