The Mental Strategies of Top Traders: The Psychological Determinants of Trading Success

4.6. CASE STUDY ON CREATIVE THINKING

This dialogue gives examples of how to find original, creative ways of looking at companies in a nonconsensus way. This is critical by way of demonstrating how a PM must think independently. There is inherent discomfort when thinking in terms of variant perception. So, how can you be empowered and ready to step up to the challenge, and how can you empower your team to do so as well, especially during crisis periods?

Kiev:

How do you deal with the fact that with Reg FD it is particularly difficult to get an edge on companies? How do you develop a nonconsensus or variant perception with the limited amount of information available?

Tom:

Five years ago, before Reg FD, everyone would get involved in cleanup trades, buying the last two million shares that a large mutual fund was selling. Today, the large mutual funds are V whopping all their trades, trading them at an evaluated average price. Today the blowout decisions are being made by hedge funds. One of their dynamics is that mutual funds don't like to have losers on their sheets when they have to report what stocks they hold to their investors. It's not an economic decision; it's a psychological decision. They don't earn a dollar more if they're less invested in these stocks. I mean, if they had losers and they don't show up on the sheet when they publish their quarterly reports, they still had losers. They just don't want to answer the questions about them. So, opportunities arise when people ...