What does it mean to be a hero in trading?

In poker, a “hero call” is sometimes appropriate. It refers to the call of a very large river bet with medium strength — or even Ace-high — based on a strong read that your opponent whiffed on a draw and is representing a huge hand to steal the pot.

In markets and trading, there is no official definition, but we can more or less surmise being a “hero” looks like the following:

Putting your foot down and saying “markets will do X, I’m sure of it!”

Pointing to the sky like Babe Ruth — “this is where my profits on this trade are going to go!”

Making large bets (relative to your capital base) with a do-or-die mentality. “Dammit I am right!!!”

Declaring with godlike authority how certain macro events will play out. “The treasury bond market WILL collapse!!!”

And so on…

Off the top of my head I can think of three ‘hurting heroes’ right now: John Paulson (gold and gold stocks), Kyle Bass (Japan) and Bill Ackman (Herbalife, JC Penney). There are probably many more…

There are also many semi-heroes among the journalists and chattering classes, though these guys don’t really count. If the pundits make a huge prediction and it comes true, they get lots of publicity. If it doesn’t come true, no skin in the game so who cares… they just wait a while and make another big prediction. Wash, rinse, repeat.

What does NOT being a hero look like in trading? Some possibilities:

• Not trying to catch the absolute top or bottom
• Not “fighting the tide” because you are “right”
• Being agnostic and opportunistic deep in your bones
• Changing your stance immediately if price action fails to confirm
• Never entering without price confirmation in the first place
• Looking for max risk-adjusted odds of profit, not max glory

Not being a hero means less glory, but ultimate far more profit, because if you have the patience to wait for the (non-heroic) optimal moment — which is almost never the initial turning point, which heroes love to call out — you can more effectively scale up and put leverage to work in your favor.

Not being a hero in respect to adverse price action — dumping positions quickly that aren’t working out as planned — also lets you safely deploy more size in general, which in turn allows for more effective pyramiding and greater profits from the very same move the hero took with less size (because he got chewed up so many times trying to catch the damn turn).

And of course, there are the invaluable merits of pure survival and never going down with the ship (as heroes all too often do)…