Sunday, January 31, 2010

Preparation, Performance, and the Look of Success

Thanks to Bella of SMB Trading for this link that illustrates what lies behind greatness. We see a young basketball player like JaShaun and we think of inborn talent. What we don't see is the many hours, days, weeks, months, and years of preparation needed to hone that talent into skill.

Each weekend I spend several hours scouring my indicators, reading the best blog posts and articles I can find, and reviewing my trading performance from the past week.

Out of that comes a tentative game plan: an idea of where I think markets are headed, an idea of alternate scenarios, specific plans for trading those scenarios, and concrete goals for improving my trading over the past week.

Week after week, that preparation adds up. It builds a sense of mastery and fuels confidence. There is nothing that beats the feeling of stepping into the arena and knowing that you *deserve* to win because you are prepared.

I used to have that feeling in college. I'd spend all-nighters studying for tests, while others slept or partied. I'd be exhausted sitting for the test, but it didn't matter. Sheer adrenaline--and the knowledge that I knew the material cold--pushed me through the exam. I knew that if I didn't have a 3.5 cumulative average, I wasn't going to clinical psychology grad school. That pushed me, and I pushed harder as my college career progressed. My GPA in my last two years was just shy of 3.9.

When I walked into the exam room, I *knew* I had a good shot to ace the test. It was a great feeling. Later, I would have that feeling as a psychologist. As a new professional, I would ask for the toughest emergency cases--the suicidal clients, the difficult to treat problems--because I knew I had a preparation edge. I wanted the ball in my hands when the clock was ticking down.

It's not overconfidence, and it's not cockiness. It's being prepared and knowing that deep in your being. It's the greatest feeling in the world, and it's the one that I see in the eyes of so many great, great traders.



DG's Trading Forum said...

I remember reading a quite pessimistic statement about trading by a well-known trading columnist who said, "Trading is the one area of life where there's no guarantee that hard work will ever pay off". I do think there's some truth in that, because, as Livermore said, "The family of trading mistakes is infinitely large".

I think the irony is that so much preparation time goes into things we can't control as traders (the ubiquitous "Where's the market going?" question) vs. what we can control, i.e. "What will I do if the market goes here or if it goes there?"

I wonder if the trading learning curve wouldn't be vastly decreased if people started from the risk management side of the equation, rather than the forecasting side of it.

I know that I read a study once that showed the largest contributor to the variability of traders' returns was their risk management, rather than their trade entry or forecasting skills. It was in Stocks & Commodities, but I've never been able to find it again.

Mark Wolfinger said...

Remember "10,000 hours"

I know you are a believer. Of course the hours must be put to good use.

madi said...

Yes! Purposeful preparation is a necessary ingredient to success. Thirty years of playing jazz professionally has taught me that inorder to achieve the flexibility to improvise with mastery in a performance, hours of daily preparation is imperative. Without thoughtful scientific preparation it is impossible to maintain the level of technique and mental agility necessary to engage in rapidly changing environments. Thorough preparation and a consistent history of success allows the performer to bring to the bandstand a confidence that, "Even on my worst day, I know that I'm going to perform on a professional level." It is from this experience that I can relate to this post, Brett, and to which I try to bring to my trading.


E-Mini Player said...

Excellent point Doc! I wrote a Blog Post just last night going over my Setup and How I Enter a Trade. Preparation is an essential component of my trading plan. The Blog Post is here if you'd like to check it out: