When I first started my career in this great business in the early seventies, I worked under a guy named Gary who acted as a mentor to me.
Now Gary was definitely over the top personality wise and his trading style was something else altogether.
Let me share with you one of Gary's trading quirks. Gary was a short term trader and good at it. He was talented technically when it came to charting as he kept all his charts by hand on special graph paper. Remember this was back in the seventies before we had all these wonderful charting programs that we enjoy and use everyday.
Well here I am next to Gary watching him trading in and out, in and out, of all these different markets throughout the trading day. Gary was a super busy, and successful trader and I was happy to watch over his shoulder and learn how the markets work.
The one thing I haven't told you about Gary, was that he had a big egg timer on his trading desk. Every time he made a trade he would flip the egg timer over and the sand would start running.
Now you have to remember, I was green to trading back then and had never seen someone of Gary's caliber and trading style. I just thought that having an egg timer on your desk was a normal part of trading.
Have you figured out yet why Gary was using a egg timer?
Was it because ...
(A) He liked playing with egg timers
(B) He liked to time his poached eggs
(C) He used it for money management
If you chose (C) you are correct. Gary did use an egg timer for money management. It's not as crazy as you might think and it suited Gary's style of trading perfectly.
You see Gary was using a TIME STOP. How that worked is like this, Gary would see something on his intraday charts that was a buy, and then buy it immediately. If it did not go up by the time the sand had finished running through his egg timer he would exit the market win lose or draw. It was just that simple.
I never had the type of trading personality to trade like Gary, but I have to admit the egg timer worked.
Next Friday, I will be writing about some other forms of money management that may not be as quirky as Gary's, but they all work in trading.
See you next Friday.
Have a great weekend and trading week.
P.S. Look for blog updates on Monday, Wednesday and Friday.