Trading Lessons From Peyton Manning
Trading Strategies Adopted From NFL QB Peyton Manning & Coca-Cola
This trading lesson will be very entertaining if you are a sports fan and/or play fantasy football. Even if you aren't, you likely are familiar with Peyton Manning.
Peyton Manning is by far the best fantasy player in the NFL right now. Watching Peyton dissect opposing NFL defenses is a thing of beauty.
But what on earth does he have anything to do with the world of stocks and bonds, you might ask?
The answer my friends is very simple, do what Peyton Manning does, he takes what the defense gives him.
Football Strategy
Peyton Manning is hands down the single most powerful force in NFL fantasy leagues today. If you have him as your starting QB, you have been pretty much invincible thus far this season.
Let's breakdown Peyton Manning's game.
He passes when you stack the box (your pre-snap defensive scheme is showing that you want to stop the run).
He runs the ball when you don't load the box (your pre-snap defensive scheme is showing that you want to stop the pass).
In other words, he simply takes what the defense is giving him.
In trading and investing terms, Peyton Manning has a methodology to determine if the run or pass has the greatest probability of succeeding (executing his intended play). He doesn't care if he runs or throws the ball, he only wants to run the play that has the best chance of succeeding.
Take What The Market Gives You
Fundamentally, Coca-Cola (NYSE:KO) is a rock solid company with global brand name recognition. Generally, KO is not a company you short, Coke is like Deion Sanders, when he covers your best player you don't throw in that direction.
This is an 8 year chart of Coca-Cola (NYSE:KO):
So what does this chart tell you? It shows you that the market goes up, down and sideways. Sure the market usually goes up over time, but you want buy when the market is going up and sell when the market is going down.
What would Peyton Manning do if he saw this chart?
He would realize that he should go Long (buy stocks) when the market was strong (the chart will show the price action, the squiggly lines going up).
He would go Short (Sell stocks short) when the market was weak (the chart will show the price action, the squiggly lines going down).
If you are the average investor and only go long stocks (Buy only) then you aren't operating as efficiently as Peyton Manning. To protect your portfolio and diversify, you should learn how to potentially make money when the market goes up or down.
If you got burnt by the stock market crash of 2008/9 that's because you went long stock in a declining market. The most important thing to realize is that markets go up and down and your job is to move in sync with the markets.
Be like Water.
Here's the 1 year chart for KO:
Study the chart and tell me what Peyton Manning would do?
Peyton would realize the price KO stopped going up and that the price is in a sideways price action. The price behavior has changed.
What does this mean in football terms? The defense is in no man's land, the defense isn't showing him what it wants to do.
So what does Peyton Manning do? "Omaha", "Roll Montana", "Check", "Funky Chicken".
Peyton will call a lot of fake audibles, fake the snap, extend the snap count until the defense shows what it wants to do.
Peyton Manning is just buying time. Remember, he wants to run the ball on your pass coverage and he wants to pass the ball on your run package.
In the real world, Peyton Manning would have to run a play before the play clock runs out or call a time out. If Peyton Manning doesn't have a read on your defense then he will try to exploit your worst match up. He will pick on the weakest defender.
But in the markets, Peyton Manning would simply find a bunch of the Strongest stocks and buy them. He would also find the Weakest stocks and sell them Short.
That's what he does with his receivers, tight ends and running backs. He doesn't favor anyone of them. He simply goes with the best matchup. If you have double coverage on his best receiver then he will throw it to the other players who are open.
Conclusion
Peyton Manning is the best player in the NFL because he takes what the defense gives him.
As a trader or investor, you can learn from his mindset and learn how to trade and invest in the direction of the path of least resistance.
Peyton Manning spends countless hours learning how to read defenses so he can find the best matchups he can exploit.
As a trader or investor, spend time studying how the markets work and testing methods to find the sweet spots.
Remember, the markets go up and down and your job is to Buy stocks in a rising market, Sell short stocks in a declining market and to stay clear of a sideways market.
This is a cursory look at Coca-Cola (NYSE:KO) and we are not making any specific buy or sell recommendation but merely voicing our opinion of the current situation. Each individual investor must conduct their own due diligence of both the company, the market sector as well as their own financial situation and risk parameters.
If you ever find yourself in a prickly situation, take a breath and pause, call a few audibles and do what Peyton Manning does, take what the defense is giving you.
Courtesy of Joel Laceda, BehindWallStreet.com