Most traders struggle when they first begin. The great news is the worst you will ever be as a trader will be when you first start. And you have to hang in there and focus on improving. GMan, one of the better intraday traders trading today, walked into my office to quit. He went from "I quit" to head trader. I was negative $36k, eight months in and am writing this book. My partner did not make money for his first six months. One of the best intraday traders on the street was absolutely one of the worst at my original firm. This trader was in the bottom ten percent of our firm and today he is in the top one percent of all day traders. Our most improved trader this year floundered for his first seven months and now is headed to becoming a star. It takes time to be good.
And I see this time and time again. Those that can give trading more time when they start have a better chance to succeed. 8 months is better than 6, and 12 is better than both. You need reps. Like Michael Jordan who did not make his varsity basketball team when he was a Sophomore in high school you must be patient. But your time will come.
At the start you should trade with small size and with one stock. You should not increase your tier size until you are positive 7/10 trading days. You should have a small max loss when you begin. You should be limited to the amount you can trade. For example when a new trader begins they should not write more than 10k shares in a day.
When you start you will need reps. You will not get better until you gain experience. Stay patient.
Let's visit a recent column "Genius: The Modern View" by David Brooks of the New York Times to offer clarity on a trader's need to be patient when they begin. Mr. Brooks wrote insightfully about the modern genius model in our society. He noted that it takes concerted practice to become great. Brooks wrote, “The key factor separating geniuses from the merely accomplished is not a divine spark. It’s not I.Q., a generally bad predictor of success, even in realms like chess. Instead, it’s deliberate practice. Top performers spend more hours (many more hours) rigorously practicing their craft." We are not born great at anything. You were not born a great trader.
Not convinced yet that you are not going to be a great trader on Day One? Let's check out Malcolm Gladwell's latest page turner "Outliers". Mr. Gladwell explores the commonalities amongst the uber-successful. Those that Mr. Gladwell studied all worked at their craft for at least 10,000 hours before they were great. Bill Gates, Tiger Woods, The Beatles, Bill Joy all had extraordinary opportunities to practice their craft, which was responsible for their greatness. Gladwell explains, "Working hard is what really successful people do."
Geoff Colvin in "Talent is Overrated: What Really Separates World-Class Performers from Everybody Else," wrote that deliberate practice, often with a continuous feedback is necessary to become great. Concentrated practice is the key.
Let's explore the world of tennis for further evidence that you must remain patient to become a solid trader. Russian women accounted for half of the top 10 ranked players in the world in 2007. Wow! Three of those players were produced by Spartak, a dumpy club where they felt lucky if the heat worked. Their secret? Deliberate practice on technique, constant critical feedback, and improving weaknesses. At Spartak passionate instructors focus on the brickwork of developing the skills of their students. Players start at 5, so they have practiced for at least 10 years before we ever meet them at Wimbledon or better yet the US Open in
Ok so you don't like sports, let's use an example from trading. After all this is a trading book. In "Reminiscences of a Stock Operator" we read, "Years of practice at the game, of constant study, of always remembering, enable the trader to act on the instant when the unexpected happens as well as when the expected comes to pass." So I guess you got to practice as a trader also. Sorry.
a) Be patientb) Start slowly
c) You need reps
d) It is hardest at the beginning
I would recommend that book "Outliers" to you guys. It's probably available used on Amazon for $10. You always hear people say "I wish I was like that", or "you're so lucky". I like the quote about by the time we first seem them there is already 10 years in the making behind it. That's so true. Most people in our culture aren't willing to do the hard work or attempt something where they can fail. Those are the ones on the outside looking in wishing and hoping they could be great at something.
ReplyDeleteI think we all know that none of us are going to be great at something unless you love it. How else can you put in the thousands of hours or years of work until you become great. And the good part is I don't believe it would take years before you would have to make the decision that something isn't right for you. Your gut would probably tell you the pretty early on.
Mark, that day you told us the story of how you went outside and took a walk instead of just giving up for the day or all together even, that was a turning point in your life in my opinion. It doesn't mean that just because you decided not to give up that day that you would be profitable that day, but it signaled a message to yourself that you're willing to endure some pain and not run away when everything doesn't come up roses 100% of the time.
Good stuff huh. Thanks Mike at SMB for the insight.
ReplyDeleteSo it sounds like you are digging into the material that I sent you Mark. Way to go.
Oh and Jason when you are ready and done with school, I will send you all the material that I was able to collect from SMB.
yeah the first doc is over 650 pages... I'm about a tenth of the way through reading but at least it's entertaining and flavored.
ReplyDelete