Anne-Marie Baiynd was a neuroscience researcher and by her own admission, her vast educational background across mathematical and behavioral statistics wasn't enough to succeed in trading.
After years of research and hands-on experience, she detailed her findings on how to gain an edge in trading in her book aptly named "The Trading Book."
Over the weekend, she shared some inside knowledge as a presenter during Benzinga's trading Boot Camp.
The Baseball Analogy: Sluggers, that is baseball players known for their frequent extra-base hits, actually have lower on-base percentages compared to the average, Baiynd said. But sluggers also know how to position themselves for monster hits without swinging too hard or too fast.
Traders looking for monster "hits" (trades) but pay no attention to how hard or fast they swing will only cause harm to themselves, she said. By contrast, traders with the right slugging attitude all know "where you need to get in, and know where you need to get out."
The good traders also know in advance how and when to determine if they are on the wrong side.
Market Doesn't Know You: Traders should be reminded the "market doesn't have any knowledge" of your loss management strategy, nor "does it care," she said. As an example, a trader willing to risk a 2% loss on a fast-moving stock would get traded out quickly.
The trader needs to look instead for the "no-fly zone" that the market is dictating as part of its support levels, or "price memory."
Be In Control: The "master investor" will pick the stocks they want to follow based on patterns that are recognizable. They will put alerts on the trading platform near areas of support and will then "simply wait" for the opportunity.
One Example: Shares of Pinterest Inc (NYSE:PINS) showed signs of buying momentum from mid-May and peaked on June 5. So how can investors know in advance if a hot stock starts to cool down?
"Wait a day or two, and if it is not closing above your candlestick's prior day's close and making higher highs -- hold the phone because you are going to come back into a support zone," Baiynd said.