Investor Goal-Line Stand: Don’t Outsmart Yourself

Whether trading or investing, it’s important to stick to the fundamentals and not try to outsmart yourself.
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Football coaches often talk about focusing on the basics, “blocking and tackling,” and keeping it simple. So do CEOs, for that matter, referring metaphorically to executing a profitable, smoothly running business.

This brings us to last Sunday's Super Bowl, which ended in thrilling, and quite controversial, fashion with a goal-line decision to run a higher-risk play (throw the ball) versus something typically "safer" and plain-vanilla (run). Unless you decided to call it a night after Katy Perry's halftime show, you probably saw what happened.

You may or may not have had a dog in that fight, emotionally or financially. But for investors and traders alike, Super Sunday’s dramatic climax offers a few lessons on the fundamentals, according to JJ Kinahan, chief strategist at TD Ameritrade.

Consider some “blocking and tackling” for your portfolio or trading strategy: Know, and stick to, your strengths. Remember the assets or tactics that got you where you are now and beware of riskier moves outside your core competency. Don’t overreach or try to get cute.

“Don’t try and outsmart yourself,” Kinahan said. “Go with the things that are working. Don’t think, I have to do it differently to make it exciting.” Being “consistently boring” is much more important, Kinahan added. “It’s not meant to be a game. If you want games and excitement, go to Vegas or an amusement park.”

For example, if you’ve found selling vertical spreads in the options markets fruitful, “don’t feel like you have to suddenly start trading calendar spreads,” Kinahan said. If you’re considering a trade or an asset you haven’t used before (say, futures markets) sample from the appetizer menu first.

“If you’re starting something new, start small,” Kinahan said. “Don’t go all in with a new strategy. All-in is not a smart way to start.”


FIGURE 1: MAKE YOUR DATES. Check the calendar (red circle) on for upcoming earnings calls (red arrow), economic reports, and other events. Source: TD Ameritrade. For illustrative purposes only.

Coming off a tumultuous January for U.S. markets, it’s particularly important to take a step back to think about the fundamentals and the long view. The Standard & Poor’s 500 Index lost 3.1% amid spiking volatility, cratering oil prices, and renewed concern over Europe.

From January 2–8, the S&P 500 had daily trading ranges of about 20 points, Kinahan noted. The rest of the month, the benchmark swung as much as 30 points a day. The market’s skittishness was illustrated in the CBOE Volatility Index, or VIX, which averaged 19.1 during January, based on closing figures. That’s a jump of nearly 35% from an average of 14.2 for all of 2014.

January’s markets may have left some of us understandably rattled. But here’s another way to look at it: You can now take that page of the calendar, wad it up, and throw it in the trash can. Move on to February and everything beyond.

For starters, check your calendar functions on, Trade Architect®, or thinkorswim® and get a sense of quarterly earnings releases, economic reports, and other potentially market-moving events ahead in coming weeks, Kinahan said (see figure 1). Also, take a look at charting functions available for specific stocks, and see how recent prices compare to the longer-term trend.

In post-game remarks to the media on Sunday, Pete Carroll, the Seattle Seahawks' coach whose team was on the losing end, took responsibility for the play call that resulted in an interception (followed soon after by a fourth Super Bowl title for the New England Patriots). He suggested that if the pass attempt didn’t work, his team would have gone back to the run on subsequent plays. If the Seahawks didn’t reach the end zone on second down, “then we run it in on third or fourth down,” Carroll said.

Instead, he didn’t get that chance. Carroll may indeed return his team to the Super Bowl. But a similar notion could be applied to the markets: money lost to any ill-timed or ill-advised decisions is probably gone. Better focus on getting ready for your next chance to get it back.

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