Norm Explains Trading What You Know

The second sentence of this blog depresses me as I can vividly remember this event.  Twenty years ago today on May 12, 1993 NBC broadcast the last episode of Cheers.  For those of you that do not remember the show I envy you and your youthful age.   However, those of you that do remember the show probably already have the song, “Where Everybody Knows Your Name” playing in your head.  Sorry, I know it’s stuck there for a while.  I do apologize.

What the show was really trying to get across through using this ballad in the opening sequence was to encourage individual traders to focus on the familiar.  Everyone was familiar with Norm and yelled out his name as he walked in the bar.  This was the ultimate in being familiar and feeling comfortable.  This holds true for trading as well.  Stick with what is familiar and comfortable.  How to do that?  Focus on a few names (stocks) and get familiar with them.

As an aspiring stock or options trader you do not have to trade every stock that is mentioned on your favorite business network.  In fact you are best suited to focus on a limited number of stocks.  Get familiar with them and develop some comfort.  All stocks and companies have their own trading patterns and reactions to news items.  Their respective option markets will have their own characteristics as well.  By focusing and becoming familiar with specific stocks you can increase your odds of success.