During an interview prior to this year’s All Star Game, Joey Votto, one of Major League Baseball’s best hitters, described his approach to hitting. For those unfamiliar with the sport, hitters do not just look up at the coach for a sign and then step in to the batters box and swing away. Like any extremely difficult endeavor, there is a detailed game plan that involves countless hours of hard work behind the scenes that typically goes unnoticed by the casual observer before a batter ever steps up to the plate to face a pitcher. Because both professions involve an inordinate amount of failure for even its most successful members, there are many parallels that can be drawn between hitting a baseball and trading. A hitter can no more decide to hit a baseball than can a trader just decide to win a trade. Both activities are fraught with uncertainty and and require a systematic approach that capitalizes on statistical probabilities in order to put the individual into a position to succeed. With this in mind, lets take a look at Joey Votto’s approach to hitting and see if we can adapt some of his tactics towards our own approach to trading.
“Well, first of all I make sure I do all my behind the scenes stuff…You and I have talked several times about the importance of getting in your work, prepping every day, making sure that your swing is locked in so that you can take the swings on the pitches that you’re looking for and not miss. Because, us as ball players, we only get so many opportunities…every single day we play, to put something in play with some heat O.K., so I make sure I do all my work before hand to give me the confidence and to have the swing every single day when I step into the batters box.”
It is interesting to note that even though he was addressing how he approaches a specific at bat, Votto considered the first step to be all of the “prep-work” that he goes through outside of the actual games. He stressed the importance of making sure that his swing is locked in so that he could have the confidence to execute the game plan every time he steps into the batters box. Keep in mind that this is a person at the absolute top of his profession and he still talks about needing to have confidence in his swing and the necessity of reviewing the fundamental components of his swing on a daily basis to make sure that he can depend on it when he gets the opportunity he is looking for. As traders, we also only get so many opportunities and must be absolutely certain that we are able to capitalize on them when we get the chance. Instead of a swing, we must depend on our trading plan and our ability to execute it. Like a hitter, it is of paramount importance that you have a fully developed plan of attack so that when you get the pitch (setup) you are looking for you are able to take your swing (trade).
One of the most critical aspects of hitting a baseball is to have your sense of timing down, and trading is no different. This is why we have rules for entering a trade. Enter too late and we miss the move, enter too early and we not only start in the negative, but also likely place ourselves in a losing trade since our setup isn’t even completed at this point. Our sense of timing is dictated by how well we follow the guidelines we have for entering trades. Another important aspect of hitting is the swing’s tempo. Great hitters don’t over swing or under swing. This is not to say that they don’t swing hard, or even sometimes adjust how hard they swing depending on the situation. However, great hitters always swing within their abilities and apply the force they use to swing in a smooth and consistent manner. The tempo of a trade is dictated by the risk management principles we apply to our approach. Risk too much and we are over swinging, risk too little and we under swing. The same applies to our approach to the reward side of the equation. Get too greedy and we are over swinging, get too fearful and we are under swinging. Each trade setup has its own internal tempo dictated by how much we decide to risk and what our particular exit strategy is, and following these guidelines keeps us from trying to overdo things and instead approach the trading day with consistency. These are the components of our swing, and like Joey Votto, we have to review them on a daily basis to ensure that we can depend on it when we see the pitch we are looking for.
“The second thing I do is, I try to make sure that I pay attention to what the pitcher’s throwing, watch his video and pick out the pitches that I can handle…and it doesn’t necessarily have to be a fastball, it doesn’t have to be, you know, that grooved 90 mile an hour fastball down the middle or away or whatever, it can be any pitch as long as I can handle it and do damage.”
After insuring that his fundamentals are in line, Joey Votto’s next step is to turn his attention towards the pitcher he will face and study his pitches, habits and tendencies. From this observation, he will begin to isolate certain pitches and situations he believes he can take advantage of. The key here is that he is looking for the pitches he is comfortable with, not necessarily the obvious “grooved fastball” everyone looks for. Traders need to take the same approach to each day. We must understand our strengths and weaknesses, what setups we excel at trading and which set of conditions allow us to thrive. We must anticipate the conditions the market is likely to throw at us and isolate the particular setups we consider to be in our “wheel house” and avoid the others.
“I take the at bat and I take steps down – so that at the very beginning of the at bat, I’m thinking about something I can hammer through the gaps, and as the at bat ticks down and I become more against the wall… my back gets pushed more against the wall, I try to do less during the at bat, and until I get to two strikes and then I’m just trying to put the ball into play hard, trying to not strike out and do something for my team.”
Once he understands what pitch he is looking for, Votto is ready to step up to the plate. The last adjustment to make is to understand the situation within the at bat as it develops. Early in the at bat or when he has the count in his favor, he will look to hammer the ball as he is in a position of advantage. However, as he goes further into the at bat and the pitcher begins to gain the advantage he eases back on the throttle and applies more caution to his swings as he attempts to just put the ball in play. For traders, the market is the pitcher we face every day and our “count” is the market conditions we are currently in. Is the market in a strong trend? Then we are ahead in the count and can take some healthy cuts at it. Is the market in a wildly volatile correction? The market is probably going to throw us a curve ball and we better scale back and take a more cautious approach and just try to make contact as the count is certainly not in our favor at that point. Once we take stock of where we stand in the at bat, all we need to do is look for our pitch and take our swing when we get our chance.
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