Locals a.k.a Outliers

There is a book worth reading by Malcolm Gladwell called Outliers. The premise of the book is that if you are smart, lucky and hardworking you will be highly successful. The luckier you are the more successful you will be.

Bill Gates and Paul Allen were more lucky than anything else. So were the Beatles.

Bill and Paul found themselves as two 16 year old nerdy geeks who had the very rare access to a computer that they could program. At the time, it was unheard of to have access to a computer even for university students but they found themselves with the opportunity to play all night. While most kids were sneaking cigarettes and peaking at Playboy, they were in a computer lab writing software.

When they came across an opportunity to apply their skill they had logged 10,000 hours of screen time. They were smart and hardworking and took advantage of every opportunity but more importantly….. they were lucky.

The Beatles started out smart and talented but they had more luck than talent. One of their first gigs was to play at a German strip club 6 days a week for 8 hours at a time. These kids were talented enough to be offered the job and smart enough to take it. Well…. I’m not too sure how much intelligence that decision took. They were young kids with a chance to drink beer and sing to naked women for 8 hours a day. Not a whole lot of smarts were needed to make that decision….

What happened though is that all that stage time gave them the practice they needed to become a great band. By the time they played Shea stadium they had 10,000 hours of stage time.

You can still be successful without as much luck as Bill, Paul and the Beatles had. You just might not get to their level. But if you don’t put in the 10,000 hours of hard work you will never make it.

Most wannabe traders blow out and give up long before they log the hours needed. But once you make it past the required time, which is a feat in itself, you have a great chance of being successful.


Most of the locals in the pit have well over the 10,000 hours of hard work needed to be successful. They are also smart. More street smart in the S&P pit, more book smart in the options pit but smart nonetheless.

They are also lucky. There are not a whole lot of traders in this world that have the opportunity to “make the market” in the largest equity futures pit in the world. Oh sure, with enough money you can buy a seat and open a margin account, read the rule book and trade in the pit. But you won’t last long.

The lucky ones worked as runners and were smart enough to pay attention. Others had a dad or brother who showed them “how things worked”. That cut down on a lot of hours needed to learn the game. Its important that the teacher is a relative. You won’t doubt what a relative tells you. Lacking a relative, its up to you to learn a little here, learn a little there and spend 10,000 hours watching ticks on a screen.

Most wannabe traders don’t want to do the work. They want someone to tell them all there is to know. The problem with that is they never gain the confidence needed to be successful. They also tout themselves as heroes when the trade works well and blame others when it fails.

Trading is all about confidence. Locals can get run over time and time again and still take the next trade because they have the confidence knowing that they will end the day green and if not, they will get it back tomorrow.

We saw a lot of down side activity today. All houses sold size off the open and locals were long. We opened well below yesterdays opening range, Value Area low and my propriety range. This is bearish and the houses thought so too. The locals simply took the other side as they usually do and made a best effort to bid the market up hoping to attract buyers. Failing to find buyers they wasted no time reversing and we had a great break of 10 handles below the OR (Opening Range). Locals found bids on the low and joined in rallying the market back up to the OR but a sellers market wont make if far above the OR and back down we go test the IB low, back up to the OR and eventually a test above. Its noteworthy that we completely failed to find buyers above the OR and sold off hard. Tomorrow is options expiration so we may see some continued volatility as lots of puts will expire in the money….cant wait.


Tim Mack


"I find the harder I work, the more luck I seem to have" - Thomas Jefferson