Tuesday, April 14, 2015

A Simple Strategy for Developing Yourself as a Trader

Here is a simple formula for developing yourself as a trader:

Find the people who most consistently come up with the most original and useful observations and ideas, study their thought processes (how they're generating those ideas), replicate those ways of thinking for yourself, and take the time to begin thinking like them.  Imagine doing that across many virtual mentors over time so that you begin to integrate the best thinking of the best people.  That is how imitation turns into innovation.  

Take a look at who you're following in social media.  If you're spending much time reading material from those you don't want to internalize, you'll wind up with little cumulative development.  A great exercise would be to curate the $STUDY stream of StockTwits and immerse yourself in the educational offerings of only those you'd like to emulate.  

You can't elevate your game unless you surround yourself with the best out there to challenge you, inspire you, and inform you.  You win by studying winners.

The same is true for stock picking.  How many people truly study the best performers during any given period and reverse engineer that performance?  There are common features of best and worst performers among stocks and markets, just as there are common features of best and worst traders.  You learn to select the best trades and investments by studying the best trades and investments.

Kudos to @ivanhoff and @howardlindzon for their recent offering on identifying the next Apple among market performers.  The greatest investments don't start as the most optically appealing choices in many cases.  Similarly, great trades to the long side often start as scarily weak markets--October, 2014 being a recent case in point.  If you study one winning idea after another, however, you begin to see common threads.  You immerse yourself in winning trades and, after a while, you recognize patterns as they emerge.

It's great to focus on our mistakes and correct our errors.  Reducing the negatives of performance, however, will never in itself generate elite positives.  If you want to perform at high levels, you have to study--and internalize--high level performance.

Further Reading:  The Success Pyramid