Author: Michael Arold
Covestor model: Technical Swing
The other day I saw a fascinating documentary about the 1960’s Apollo moon program which reminded me of some important trading lesson. The German film is called Aufbruch ins All (“Departure to Space”).
During early development stages for Apollo, rockets frequently blew up in the testing. Engineers got frustrated because there was intense pressure from Washington to move the program forward. According to Jesco von Puttkamer, who was one of the engineers, program director Werner von Braun was pretty cool about the failures. He kept saying that they were fine as long as they gained telemetry data during the test flights. These recordings helped them to find the source of the problems. Ultimately, von Braun’s team succeeded, of course.
Trading is similar: some trades will blow up, and it’s no big deal. As long as the trader knows why, he is fine. There are two reasons why a trade can fail: by design, or by mistake.
The “failure by design” is nothing to lose sleep over: no trading strategy has a 100% win rate. That number can end up somewhere between 40 and 70%, depending on the strategy.
“Failure by mistake” is an issue and something every trader, including me, has to work on. Nobody executes the perfect trade all the time – sometimes one is biased, and sometimes one is not following his own trading rules. That’s why it is extremely important to monitor one’s trades in as detailed a manner as possible by writing a journal and collect “telemetry data,” if you will.
Most important, though, is to be relaxed about it, like Werner von Braun. He probably would have been a great stock trader as well, but since he was a genius he would have excelled in every field. Geniuses tend to be multi-talented.
