Fly Fishing the Stock Market: How to Search for, Catch, and Net the Market's Best Trades

CHAPTER 6

The Art of Deception

In fly fishing, you offer the wily fish what looks like food—only to put a steel hook through its jaw and turn it into your food instead. The art of deception is at the heart of fly-fishing success.

The big fish are big for a reason. Their ability to discern what is real and what is not has enabled them to survive. Countless times, I have presented a scrumptious offering, but a monster trout coming up to strike my fly would turn at the last minute as if to say, “No, thank you.”

The little fish, on the other hand, are not as careful and are much easier to deceive. They overlook the fact that the fly isn't the right color or size and perhaps doesn't float on the water like the real thing. When hunger overrides caution, these small fish strike and take the bait. On occasion, I have hooked a fish that managed to get loose, only to strike again at the same fly—and get caught. This irrational behavior contradicts the old saying, “Once bitten, twice shy.”

Market participants can be divided into two groups: the pros and the amateurs. The former are the predators; the latter are the prey. The pros are patient and wait for the amateurs to spring for the tantalizing technical set-ups that frequently form on the charts. After the prey jump in, attempting to make a killing, the predators hook them.

You need to recognize the market's feeding frenzy. Align yourself with those who keep pulling the small fish out of the water for consistent gains. The next step is ...