Trading and Training – Investing Lessons from a Lifetime Athlete

January 28, 2022No Comments


Hello, and welcome to the Smart Money, Dumb Money show. And I’ve got a little bit of a treat for you today. This is a little different than my usual analysis. What I’m doing is I’m going to introduce to you something I was thinking about the other day. You see I’m a 60 year old athlete. I’m turning 60 this year, 2022. And I have been racing bicycles literally since my late twenties. I started off as a mountain bike racer. Originally I was just a ordinary person that rode my bike for fitness and I morphed into somehow got involved with bicycle racing on a mountain bike and moved into road cycling and then road racing, and then time trialing, which is my main discipline these days. And it’s been a few years since I’ve done any racing because of COVID really. And I literally stopped training in the very early part of 2020.

 

Well guess what happened in the very early part of 2020? And I kind of lost a lot of my race fitness and just saw that as 2022 is coming around I’m seeing more and more events on the race calendar here in Canada and in the United States. So I often go to Florida and I can sign up for races and compete in the races in Florida, as well as the races in Canada and time trials are a type of race that they seem to be holding more consistently, even through the pandemic. So with that in mind, I hired a coach and I’ve used coaches before, as well as self trained. I’ve got more than 30 years of experience of training discipline, but working with the coach again has reminded me of the principles, cuz I’ve really been away from these principles for three years.

 

And I’ve always likened the principles of training and that’s different than fitness riding, but training for an athletic event, particularly an aerobic athletic event like marathon running or triathlon or cycling like I do. These are called aerobic disciplines. Training as an aerobic athlete is a very, very structured process. More so than many other sports. So there’s a lot of dedication to make your body be able to endure for a long period of time versus put out short spurts, such as some events like hockey and whatnot. So I’m going to compare cuz working with my coach, I’ve been following a structured plan and it’s been very enlightening as to coming back to the world of training. And I recently conducted a course on trading technical analysis. “Techniques to Profit in the Market” is the name of the course. And there are some real comparables here.

 

So I want to go into a very quick PowerPoint that I put together and I think you’ll appreciate the comparables. And I want you to think as a trader as an athlete thinks, and that is as a disciplined person. So let me share the screen and I’m just going to go right into the course. So I will see if I can’t start from the beginning somewhere. There it is. Okay. Slideshow. There we go and play from start. Okay. Pardon my messing around there. So we’re gonna compare training disciplines to training discipline and people like me, who’ve been training for most of their lives for sport, athletic events, competition specifically, we’re called lifetime athletes. And so, uh, I train to race against people my age. Now I don’t try to beat the 20 year olds. So just to give you a basis of how an athlete, an aerobic athlete looks at things, we will tend to look at things from the point of periodization. You do different things at different times of the year, you can’t maintain peak fitness all year round.

So what we do is we go through base periods where we’re just doing the miles and then we do a build phase to build our bodies back up to that race level of fitness. And then we try to peak for an event. And usually you can only peak a couple of times a year. So that’s what periodization is. And I’m going to do a comparable in a minute of all these principles to trading because they’re almost identical. Diet, now, obviously you don’t have to diet as a trainer, but there are comparables. We look at portion sizing, macronutrients. Did, you know, by the way that a athletic, aerobic athlete has to take in more protein than say a giant bodybuilder or a power lifter. That’s a fact. Aerobic athletes break blood cells down because of the high heart rates we will hold for.

 

In my case, as a time trialer, my events are often 20 to 40 minutes long and my heart rate is high for that period of time. Well, it’s a lot of squeezing of those blood cells through the pipes, so to speak and, and they actually get damaged and broken. So this protein and iron and that kind of thing are actually more important to an aerobic athlete. A lot of people don’t know that. And of course we do work our muscles like a body builder, although not in the way to build them. So macronutrients and quality, we don’t eat a lot of junk food if you want to be a competitive cyclist, because you have to be relatively light. Consistency. You never miss a workout. And this is, sounds crazy, but it’s, you really do everything if you’re serious about training to not miss a workout.

 

And one of the things I do as an athlete is I drink probiotics. In fact, I’m drinking one right now, kombucha. So we drink probiotics and we take, you know, cold effects all winter every single day and take our vitamins and all that sort of stuff because missing two weeks or getting sick is a No. I challenge you to ask anybody who knows me, including my staff, Cindy and Craig, have they ever seen me sick? And Cindy’s known me for 25 years. And I think Craig’s only me for 15. Well, neither one of them has ever seen me sick cuz I don’t get sick. And it’s because I follow a structured program in my immune system. So it’s all part of being an athlete. Funny enough. So there’s a lot of factors to this, just like with trading. Discipline, the big deal with aerobic athletics, that’s different than any other sport, whether it’s cycling or triathlon or whatever, is that we have a saying in our discipline, we call it learn to suffer.

 

And actually what happens is, is that as you train as an aerobic athlete, your body starts producing a hormone that acts a little bit like Tylenol and it actually helps buffer the pain because we do have to hold these stretches of aerobic high end aerobic work for long periods of time. And you go through these periods of suffering. We actually it’s, the person that wins it all often has the greatest ability to suffer. So there was a test done, you know, there’s a book called “Endure” and it covers all the different aspects of being an aerobic athlete. And they did a test on ordinary people and explosive sport athletes like hockey players and body builders. And then they also tested aerobic athletes like marathon runners, cyclists, et cetera. The test was, they had buckets of cold water and they brought in like a hundred or more people.

 

It was a fairly large test. It was a pretty easy test to do. They just brought you in a room and said, robot, roll up your, stick your hand in this super ice cold water, and we’re gonna do a timer and you pull it out when you just can’t take it anymore. And what they found is that aerobic athletes like blew the general population, even other athletes that are in explosive sports, away in so far as their pain tolerance. And that is because we develop an ability to suffer. It’s just ask any competitive cyclist or marathon runner. They’ll tell you this is the way it is. We just learn to suffer. The final thing is adaptation. And are we adopted to the specific event that we’re trying to train in? And then also when things change and I’ll give you an example here.

 

The last race I did was in February of 2020, just before the March COVID breakout happened. And I came to Florida and I went in the Seabring a hundred mile bike race, and there we have to go around an actual Seabring race track on our bicycles for something like 10 laps and then go out race the road, come back. It’s a hundred miles in total, which is 162 kilometers. And what happens is, is that I didn’t have anybody there to support me. So my wife was at home and whatnot. So a lot of the competitors would have someone hand them a bottle at some point, usually at the turn round point, actually in this hundred mile course. And I had nobody there. So I stuck a special bottle cage behind my seat that would carry two more bottles for me. And what happened was we went over a bump at the very, very beginning of the race, like right at the beginning.

 

And those two bottles popped out. So I wasn’t gonna stop and get them because if you’re not in the lead group, they’ll drop you and you’ll never catch them again. So I want to be with the lead group cause I want to win the race. So I literally went through a five hour race in the heat with two bottles, which when your engine is working at a very high temperature, that’s a pretty big feat. I survived the race and I actually won it. I won my age class and I tied for first overall, I did beat the 25 and 30 year olds in that race. It was just one of those days when all the boxes were checked for me. Anyways, you have to have the ability. So I train myself to suffer through almost anything to beat that race. I really wanted to win it.

And so this is an example of dealing with the things that you don’t expect. So let’s compare this to trading because you’re not here to hear me talk about aerobic athletics. So we have a similar periodization thing when it comes to trading. We look at the macro market picture and then we look at the seasonality of the market and we make decisions as to is the market higher or lower risk? Should we be holding more cash, less cash or be fully invested. If we’re going to be invested, should we be invested in low beta, which means low risk stocks, or should we go into high beta stocks? Because we really feel that the market’s on fire and it’s gonna go up like crazy. So we want as much leverage off of that upside as possible. That’s called high beta. Hedging, is the market so risky that we should be hedging part of our risk?

 

And there’s ways to do that, that I do discuss in my new course. So diet, but we don’t actually diet in food, but we in trading, but we diet through asset allocation. We need the correct asset allocation breakdown in our portfolios. Just like protein versus carbs in cycling, you need, you know, how much are you gonna have in metals versus the banking sector versus whatever. So there’s position sizing and there’s also quality, risk, quality and risk return decisions you have to make. Do I want to take on perhaps lower quality positions with the idea that maybe they’ll have a short term pot such as people in 2020 were buying pretty low quality stocks like Peloton and all that and sending them up. I mean, not that they were, it’s a bad company, but these were stocks that really didn’t deserve to go up to the valuations they did and yet they were going up.

 

So you bought them. So if you were that type of investor. Consistency, so again, remember just like never miss a work out. Well, you have to be consistent in your strategy. And, by the way, that’s what my course is all about is developing this consistent platform that you will work off of, which is what do you do to find new buy candidates? What is your structure? What are your sources to find those buy candidates? What are your entry rules once you find those buy candidates? Do you just buy ’em cuz you found them or do you have some technical entry rules? Well, I’ll do it if it breaks out past a point of resistance or whatever. Profit and loss selling rules. So when do we take our profits? When do we take our losses? All right. This is very important. Selling is really important.

 

The final, the next thing is discipline. So remember I talked about learning to suffer. As an aerobic athlete, I have to suffer when the going gets rough. The last five minutes of a time trial, by the way, as I said, you are suffering so badly, you’d write a check for a hundred thousand dollars just to make the pain stop. It’s that bad so it’s sometimes that way, it seems that way almost with trading because there’s two things that can happen with trading. If your trade goes wrong and it breaks support, you have to sell and you don’t want to sell because it means taking the loss. And what if it bounces back then you’re gonna, you know, put that gun to your head or you made a profit and you’re at your level of, say you were aiming for a level of resistance and now you’re doing well.

The news is just fantastic. Maybe it’ll break out. Maybe it will. But maybe you have a rule that you will say I’m gonna sell at resistance, no matter what, cuz I’ve made my 20% profit. I’m out. There’s an old saying pigs get slaughtered. Okay. So those are disciplines of suffering, you might say, that you need to take on and finally adaptation. We talked about when you have to adapt for heat and you have to adapt for what could go wrong in a bike race. Like when my bottles fell out. Well adaptation with the market, like we have our plan later. Well market’s in up trend and here’s the way we’re gonna invest and we’re gonna invest in high beta stocks because the market’s just wonderful. And all of a sudden the Fed goes, hey, you know how we were gonna raise by 25 basis points in March.

 

Ah, we’re gonna do 50 basis points down. Well, the markets will react negatively. I will guarantee you if that announcement were to come out. So you have to have a battle plan for what happens if things go wrong, like my bottles falling out. Are you prepared? Do you have an out rule that says, okay, soon as this moving average or whatever is cracked I am out. You have to be able to deal with behavioral cycles, such as Elliot wave. And by the way, I’ve just done a blog on Elliot wave. That will be out by the time you see this video. So I encourage you to read it. It’s pretty interesting. And then of course there’s adaptation to sector rotation. We are seeing that in a big way in 2022. It’s something, by the way, I can beat my chest over. I called this a move out of growth and into value.

 

And of course I’ve been harping on oil for some time and that’s been another rotation. So sector rotation, you have to adapt to this. You can’t stick to your guns and go, no I’m going to own utility stocks because that’s just what I like to own. Well, if utility stocks are in the doghouse right now with interest rates rising and markets fleeing into inflation orientated stocks. So these are the kind of things that I talk about is the adaptation and whatnot that you have to take on as an investor. So let’s look at that final principle of adaptation. This is 120 years on the stock market. This is the Dow Jones Industrial Average, and I’ve drawn all these wonderful lines on it. And you can see that sometimes markets go sideways and there are up trends. But what I want you to notice is that, and I talk about this in the course.

 

And I also talk about this in my book, “Smart Money, Dumb Money.” And that is that every once in a while on a trend like this, you get an arc off of it. And these are referred to as parabolic moves. Now I haven’t circled them all cause there’s a parabolic move right here. You will find that pretty much every parabolic move, when it arches hard off of a trend line, every parabolic move is corrected through either some sort of a pullback on the market, like it was here and here and here, or it could result in a prolonged sideway period. Here was another one, pulled back, another one pulled back and then went sideways and so on. So we’ve just, you can see there’s our trend line and this market arched off. And, and I’ve, if you read my blog, I’ve talked about this a few times.

 

So this recent correction that we are seeing on the market is of absolutely no surprise because all the market is doing is down as it did in many cases like here and here. It’s coming closer to, if not at the trend line. So that’s, that’s really what’s happening. And so are you prepared for that? And it doesn’t mean every stop goes down. And like I said, we’re seeing this rotation into value. Have you seen Staples? Normally Staples don’t do well at this time of the year? Well, they’re off the charts. Why? Because there’s a movement into value. Were you prepared? Did you read my blog? So these are the kind of things that you have to have as part of your trading plan, just like I have for my athletic adventures, a training plan. So I wanna end this with a pitch, if I may, that you go to ValueTrend.ca and you at least click on the button and learn about the course because it’s, like I said, it’s less than a hundred bucks.

 

And the course I think will allow you to have some tools to help you deal with any market. And that’s really what this is all about. And that’s what I’m here to do. I’m here to help you. I manage money. And of course, if you don’t wanna manage your own money and you feel more confident that our structure would be best handled by us, by all means, that’s what we’re here to do. And I’m going to be very excited to post our results for January, by the way, cuz we’ve done very well versus the stock markets during the recent corrections. But whatever the case, if you are do it yourself investor, you owe it to yourself to understand how professionals like myself structure, their trading platforms. And so I’ve outlined this and I’ve done it as part of my legacy. I’m trying to leave something for investors that they will look back and say, I took this course by Keith Richards and it really helped me in my investing career.

 

So, you know, you tell me that, you write me a comment on my blog and tell me that you’re enjoying the course. That makes everything worthwhile. It, if you know anything about how much it costs and how much time it took to make this course, the hundred bucks is not the issue for me. It’s, that’s why I chose to not charge $500. I told my producer I wanted to make it as cheap as possible and basically just recover costs. So you have a tool there and I do hope you take advantage of it. I may sound a little salesy here, but I really do believe that this course is of great benefit to investors. So I do hope you’ll consider it. Thank you. And we’ll see you next week.

 

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