Monday, August 14, 2006

What Trading Teaches Us About Life

Trading is a crucible of life: it distills, in a matter of minutes, the basic human challenge: the need to judge, plan, and seek values under conditions of risk and uncertainty. In mastering trading, we necessarily face and master ourselves. Very few arenas of life so immediately reward self-development--and punish its absence.

So many life lessons can be culled from trading and the markets:

1) Have a firm stop-loss point for all activities: jobs, relationships, and personal involvements. Successful people are successful because they cut their losing experiences short and ride winning experiences.

2) Diversification works well in life and markets. Multiple, non-correlated sources of fulfillment make it easier to take risks in any one facet of life.

3) In life as in markets, chance truly favors those who are prepared to benefit. Failing to plan truly is planning to fail.

4) Success in trading and life comes from knowing your edge, pressing it when you have the opportunity, and sitting back when that edge is no longer present.

5) Risks and rewards are always proportional. The latter, in life as in markets, requires prudent management of the former.

6) Happiness is the profit we harvest from life. All life's activities should be periodically reviewed for their return on investment.

7) Embrace change: With volatility comes opportunity, as well as danger.

8) All trends and cycles come to an end. Who anticipates the future, profits.

9) The worst decisions, in life and markets, come from extremes: overconfidence and a lack of confidence.

10) A formula for success in life and finance: never hold an investment that you would not be willing to purchase afresh today.


Michael said...

Great list Brett. I may have to steal, er, borrow some of those for my random quotes section of my site.

Brett Steenbarger, Ph.D. said...

Hey Michael,

That's the great thing about blogging: what is theft elsewhere is simply called linking in the blogosphere!

Of course I'm honored to be included on your site ( Thanks--


Paulo de León said...

Excelent post.....this confirm that there is something more than money in our job.....

Brett Steenbarger, Ph.D. said...

Thank you, Paulo. It's that something extra in trading that keeps me going!


Paulo de León said...

to put lyrics in the discussion listen "Shape of my heart" by Sting.....

yinTrader said...

Imitation is the best compliment one can get; I always quote.

I am putting my cursor Ctlr C & Ctrl V over your whole list to print out and pin up at my desk.

Merci beaucoup.

Brett Steenbarger, Ph.D. said...

Thanks, Paulo, I find music a particular inspiration in that regard.


Brett Steenbarger, Ph.D. said...

Thank you, YinTrader; I greatly appreciate the sentiment--


Sumit Bhardwaj said...

Hi Brett,

Great post. Why don't you publish an RSS feed of your blog? I believe, you can easily set up the RSS feed, and it would be a great help in regularly checking your blog.


Brett Steenbarger, Ph.D. said...

Thanks, Sumit. I'll look into it--


speckinspace said...

Brilliant as always, Dr. Brett! I'm a newbie trader and tend to get over-attached to an outcome of an individual trade... I greatly appreciate your point of always maintaining this precious wider perspective of markets and further, the LIFE.


kagame said...

Brett, do you read much Zen? Wei Wu Wei perhaps?

DreamJOBZ said...

Dear Brett, G'day

I too have to steal it :P Of course, I will honor you and always give a link to your books. Thank you for whatever you are doing. I always like trading because it put lots of focus inside me.. my ego & it is judgements. By the way, I am also writting an article about Finding the rough edges of Capitalism Vs Individualism with a topic Groupism Vs Team Playing. Keep Chargin'

Liev Awesome
Raj, DreamJOBZ