I’ve been in NYC this week meeting with hedge fund clients, and also did a lecture at SMB Capital. Earlier today I was in a restaurant and overheard the line from Garrison Keillor’s Lake Wobegan (sp?), “…..where all the children are above average”. It reminded me of the trading quote, “Trading is the hardest easy money you could ever make”.
Over the years I’ve talked to some extremely bright and/or hard working individuals. Some traders have been at this for a long time, others are relatively new. From what I’ve learned over the years talking to many different types of traders is that almost every one of the more successful ones have said in their own words, that they had to learn to be aware of and accept their short-comings, and to accept and tolerate discomfort. Those are the things that make a trader.
It’s not about analytical abilities. If that was the case, why do so many smart people not succeed at trading? And what about the recently popularized notion that it takes 10,000 hours of practice to become an expert at something? I get emails all the time from traders who’ve spent 10,000 hours and are still not profitable.
In trading it’s not so much about IQ, analytical ability or time spent. Of course, its not just psychology either. Psychology can’t help anyone if they don’t have a good trading strategy. But once you have the trading strategy, the only way you will rise above average (the average trader is losing or close to break-even) is to learn to tolerate discomfort and uncertainty. That, in my opinion, is the common denominator among all the above average traders.
I think this is probably true, but from the other points you listed the 10 000 hours one is probably the most important to me. But how do they spend that time? I know for me, that I would spend a lot of time just watching the markets. I think sometimes it’s hard to put into words some of the patterns I will see. This was a good sentence I found on a site called Vertical Solutions:
Continuous incremental improvement has always worked well for me.
That has seemed to be my case too. People often only see the end results of something, not what goes into it. Even though I am not at the level I want to be at, I seem to be doing much better. It kind of reminds of sports. I think a good discretionary trader eventually develops a feeling for where the markets could trade to from where they are currently viewing them at that time. Much like an athlete in a sporting event might have a feeling for where to go to expect the ball.
It does lead me to think though, are there certain personalities that will endure the learning curve more readily? I think somehow, they have to have an almost eternal optimistic belief in themselves, but also be somewhat realistic. It’s a tension. Maybe the only thing in the end is they have to really like it to get through the setbacks.
Tom,
Yes, it’s how one spends their time.Quality, not quantity is important. We
do need a certain amount of experience (quantity), but the quality of the
experience is just as critical. In some of my webinars I’ve mentioned that
screen time alone is not enough. It’s how we use that time. I like your
phrase, ‘curious incremental improvement’……especially like that you
included the word ‘curious’. We are much more open to learning with a
curious mind.
Same with journaling, I’ve seen many people maintain extensive detailed
journals, but then never make use of it; almost as if they were not
‘curious’ enough to go back and see the patterns of their own behavior in
relation to market patterns or dynamics..
Thanks for your excellent observations and comments.
Andrew