Wednesday, May 21, 2008

How Trading Dreams Come True

There is no lack of market charlatans who promote the idea that trading is easy and that riches are around the corner. These, like all get rich quick idiots, prey upon the fantasy that anyone can have it all, without really working for it.

When I wrote Enhancing Trader Performance, my goal was to describe actual successful traders I had personally observed and worked with and to capture how they became successful. I noticed a difference between the learning curves of those who succeed and those who don't, and it was my conviction that most traders fail to reach their potential because they don't go about learning markets in the right ways.

Yesterday I received two emails from traders who were doing it the right way.

The first trader had gone through a frustrating period of reduced performance, particularly as markets had become less volatile. He made conscious efforts to adjust his trading by taking profits more aggressively and reducing his trading during periods of low opportunity. He took time to visit other traders and attend a seminar, where he learned a few trading techniques that seemed promising. The input from others convinced him that he needed to narrow his stock picking and focus on areas of greatest opportunity, eliminating lower volatility names. He did that and reported in his email that it was like "a light bulb went off in my head". He had his best day in months and regained much of his enthusiasm and optimism.

Instead of simply becoming frustrated and trading more when he was trading poorly, that trader managed his risk well and sought new learning. He adjusted to markets and tweaked his trading to find enhanced opportunity. That is what winners do, and I'm very optimistic that he will find long-term success as a result.

The second trader, an insightful contributor of comments to this blog, wrote to me of hitting a trading milestone. He went through two months of unprofitable trading about a year ago and then pulled back, studied markets, and traded actively in simulation mode. He found areas of opportunity in that way and returned to live trading in December. Since that time, he has doubled his trading account, while keeping risk moderate.

This trader was unusually good at pulling good ideas from various sources and integrating them into his own trading style and niche. He didn't try to imitate anyone else, and he didn't put making money first in priority. Instead, he focused on learning and discovering his own opportunity in markets. Because he put learning ahead of trading, he is now trading very successfully.

I do see dreams dashed among traders, but I also observe trading dreams that come true. It isn't easy; it requires ongoing learning and effort. My two correspondents are a shining reminder to me--and hopefully to all readers--that success in any life endeavor is possible if you find what you love, what you're good at, and devote yourself to building skills through structured practice.


What Makes Expertise

A Look at a World-Class Trader